Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

MILSTEAD: Tax proposal likely to cost businesses

By David Milstead, Rocky Mountain News (Contact)

Published April 15, 2008 at 7:30 p.m.

Text size  

More Business Columns & Blogs

More stories »

It was pitched as part of a pro-business legislative package. Now it seems that a key part of Gov. Bill Ritter's agenda will create more losers than winners in the corporate community.

The proposal is a "single-factor" sales tax, a change from the way businesses are calculating their corporate income taxes.

Right now, a business can choose one of two formulas. One uses the company's sales and the value of its property. The other throws the company's payroll into the mix. In both cases, the business weighs what it has inside the state of Colorado vs. what it has outside the state and uses the result to determine what percentage of income is taxable here.

Don't worry if you didn't understand that. Understand this, though: If Colorado dumps both formulas in favor of sales as the "single factor," it will reward companies with significant property or payroll and punish those who ring up a lot of Colorado sales revenue without having much here by way of operations.

That's why the state's economic developers, led by Tom Clark of the Metro Denver EDC, are pushing the bill. They're backed by companies like Amgen, which has 1,000 employees in Longmont but, proportionally, a lot less in sales here.

Matt Cheroutes of the state's Office of Economic Development told the House Finance Committee, "The state's business community brought this bill to us."

Yet the Colorado Association of Commerce and Industry is formally "neutral" on the bill because its members are divided, said PricewaterhouseCoopers' Rhonda Sparlin, who chairs CACI's Tax Council. "Some will pay less tax, others will pay more," she told the committee.

That was evident in the testimony. Representatives from AT&T, Waste Management and software company Trizetto opposed the bill, squaring off against supporters Lockheed Martin, Vodaphone and Oppenheimer Funds.

It was Rep. Douglas Bruce who ferreted out the harsh truth about the bill. Quizzing Todd Herreid of the Colorado Legislative Council staff, Bruce let it be known that the council used Department of Revenue information and estimated 70 percent of Colorado corporate filers would pay more in taxes, somewhere between $25 million and $50 million in the aggregate. The remaining 30 percent get the savings.

Bruce asked a simple question: If the single-factor formula is desirable for some businesses, why not add it to the existing options and give every company a choice?

But that would cost the state revenue, Clark and other backers acknowledged. So to accomplish this part of Ritter's business agenda, which cleared the committee and seems headed for the full House, most businesses will likely pay more.

David Milstead and James Paton take turns writing Up and Down 17th Street. Contact Milstead at 303-954-2648 or milstead@RockyMountainNews.com.

Comments

  • April 16, 2008

    10:54 a.m.

    Suggest removal

    Rookie writes:

    "it will reward companies with significant property or payroll and punish those who ring up a lot of Colorado sales revenue without having much here by way of operations."

    Who does it hurt? WalMart, McDonalds, Dicks Sporting Goods. Who does it help? Lockheed Martin, Vestas, Amgen. So which jobs do we want - retail or rocket science? Retail or alternative energy? Retail or biomedical? Economically speaking, this is good public policy.