It should not come as a surprise to anyone that taxation as a policy issue has a tendency to suck all the air out the room, inasmuch as taxation itself tends to suck the life out of enterprise. And sure enough, whatever other big-ticket items might distract our attention, tax policy looms large — both in hindsight, looking back on the legislative session, and hovering on the horizon to our front.
Reforms to sales tax policy constituted some of the brightest stars in a legislative session that was otherwise rather dark and tenebrous. HB 1240, sponsored by the tenacious sales-tax-reformer Rep. Tracy Kraft Tharp with the help of Assistant Minority Leader Kevin Van Winkle in the House, and Sens. Lois Court and Jack Tate in the Senate, answered one of the biggest wishes of small-business owners by addressing the issue of sourcing, brought to a head by the Wayfair decision last year. You may recall that that Supreme Court ruling opened the door for states to charge sales tax on transactions made by businesses not located in that state, i.e. taxing the sale at the point of receipt rather than the point of origin.
When that was translated to the intrastate level in Colorado, it threatened to add yet another layer to the nearly impenetrable briar patch that is Colorado’s sales tax system. Businesses of any size which sold anything to anyone farther than about a mile away would now need to sift through the several hundred independent sales taxing entities and figure out which taxes applied in the jurisdiction they were shipping to.
Enter Rep. Kraft Tharp et al to the rescue. What HB 1240 did, among other beneficial things, was exempt smaller businesses from the nightmare of navigating the web of tax laws in the state until such time as the state makes available a geographic information system to readily provide the answers.
This may seem a minor thing, unless you happen to be the small business owner in Centennial shipping your wares to a customer in Durango.
It was also rather refreshing, in a session in which it seemed every second bill being introduced was intent on planting another landmine between a business owner and success.
This session did not mark the end of the sales-tax saga in Colorado; the Sales and Use Simplification Task Force meets again for another year this interim, and though substantial improvements have been made to the system, much remains to be done. It will be interesting to see what direction the task force looks to take and what solutions might germinate from that august group.
And that won’t be the only tax question poked at during the next few months. An interim study committee was approved to evaluate tax “expenditures” – that curious term used by government to describe the act of allowing someone to keep more of his or her own money.
This could be fun to watch. It’s no secret that the various deductions, exemptions, and credits written into the state’s tax code over the years offer tempting targets for Democrats eager to discover new means to finance the constellation of programs they envision. Central planning costs money.
But exemptions are not immune from Republican gunsights either. There is a school of thought, rather persuasive, which holds that the tax code ought not be used to try and incentivize anything; let everyone just pay the same low rate and be done with it. The counterpull to that is that a) it ignores the tax incentives offered by other states, eroding our competitive advantage, b) it is generally accepted among us small government types that the state ought to exempt from taxation the cost of doing business, and c) when confronted by an end deemed socially desirable, is it not preferable to allow people the choice and flexibility afforded by keeping more of their own money for the express purpose of paying for it, rather than employ the state as middle man? It will be interesting to watch this play out; i.e. how business exemptions, or even the notional concept of a K-12 tuition tax credit, fare in comparison with more manipulative tax constructs — electric vehicle tax credits, for instance.
And those discussions will all dovetail with the approaching battle over the Taxpayer’s Bill of Rights and the ballot measure asking Coloradans to allow the state to permanently keep excess revenue reaped over the TABOR limit. The tongue-in-cheek refrain goes that the state is “safe” for the eight months the legislature is not in session. For the state’s economy this interim offers the potential for significant good or considerable mischief, and bears watching.
Kelly Sloan is a political and public affairs consultant and a recovering journalist based in Denver.