State and Local Government and Politics (GT
State and Local Government and Politics (GT POLS 103
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Artile 38 9 9 Capitalism and Democracy GABRIEL A ALMOND of the last generation whose career was almost equally divided between Central European and American univer sities and who lived close to the crises of the 1930s and 405 published a book in 1942 under the title Capita ism Societ ism and Democracy The book has had great in uence and can be read today with pro t It was written in the aftergloom of the great depression during the early triumphs of Fascism and Nazism in 1940 and 1941 when the future of capitalism social ism and democracy all were in doubt Schumpeter projected a future of declining capitalism and rising socialism He thought that democracy under socialism might be no more impaired and problematic than it was under capitalism He wrote a concluding chapter in the second edition which appeared in 1946 and which took into account the political economic situation at the end of the war with the Soviet Union then astride a devastated Europe In this last chapter he argues that we should not identify the future of socialism with that of the Soviet Union that what we had observed and were observing in the rst three decades of Soviet existence was not a necessary expression of socialism There was a lot of Czarist Russia in the mix If Schumpeter were writing today I don t believe he would argue that socialism has a brighter future than capitalism The relationship between the two has turned out to be a good deal more complex and intertwined than Schumpeter anticipated But I am sure that he would still urge us to separate the iture of socialism from that of Soviet and Eastern European Communism Unlike Schumpeter I do not include Socialism in my title since its future as a distinct ideology and program of action is unclear at best Western Marxism and the moderate socialist movements seem to have settled for social democratic solutions for adaptations of both capitalism and democracy producing acceptable mixes of market competition political pluralism participation and welfare I deal with these modi cations of capitalism as a consequence of the impact of democracy on capitalism in the last half century At the time that Adam Smith wrote The Wealth of Nations the world of government politics and the state that he knew pre Reform Act England the French government of Louis XV and XVI was riddled with special privileges monopolies inter ferences with trade With my tongue only half way in my check I believe the discipline of economics may have been traumatized I oseph Schumpeter a great economist and social scientist by this condition of political life at its birth Typically economists speak of the state and government instrumentally as a kind of secondary service mechanism I do not believe that politics can be treated in this purely instru mental and reductive way without losing our analytic grip on the social and historical process The economy and the polity are the main problem solving mechanisms of human society They each have their distinctive means and they each have their goods or ends They necessarily interact with each other and transform each other in the process Democracy in particular generates goals and programs You cannot give people the suffrage and let them form organizations run for of ce and the like without their developing all kinds of ideas as to how to improve things And sometimes some of these ideas are adopted implemented and are productive and improve our lives although many economists are reluctant to concede this much to the state My lecture deals with this interaction of politics and eco nomics in the Western World in the course of the last couple of centuries in the era during which capitalism and democracy emerged as the dominant problem solving institutions of mod em civilization I am going to discuss some of the theoretical and empirical literature dealing with the themes of the positive and negative interaction between capitalism and democracy There are those who say that capitalism supports democracy and those who say that capitalism subverts democracy And there are those who say that democracy subverts capitalism and those who say that it supports it The relation between capitalism and democracy dominates the political theory of the last two centuries All the logically possible points of View are represented in a rich literature It is this ambivalence and dialectic this tension between the two major problem solving sectors of modern society the political and the economic that is the topic of my lecture Capitalism Supports Democracy Let me begin with the argument that capitalism is positively linked with democracy shares its values and culture and facili tates its development This case has been made in historical logical and statistical terms Albert Hirschman in his Rival Views of Market Society 1986 examines the values manners and morals of capitalism and Lecture presented at Seminar on the Market sponsored by the Ford Foundation and the Research Institute on International Change of Columbia University Moscow October 29 November 2 DOCUMENT ID 36914 ANNUAL EDITIONS their effects on the larger society and culture as these have been described by the philosophers of the 17th 18th and 19th centu ries He shows how the interpretation of the impact of capital ism has changed from the enlightenment View of Montesquieu Condorcet Adam Smith and others who stressed the douceur of commerce its gentling civilizng effect on behavior and inter personal relations to that of the 19th and 20th century conserva tive and radical writers who described the culture of capitalism as crassly materialistic destructiver competitive corrosive of morality and hence selfdestructive This sharp almost 180 degree shift in point of View among political theorists is partly explained by the transformation from the commerce and small scale industry of early capitalism to the smoke blackened indus trial districts the demonic and exploitive entrepreneurs and exploited laboring classes of the second half of the nineteenth century Unfortunately for our purposes Hirschman doesn t deal explicitly with the capitalism democracy connection but rather with culture and with manners His argument however implies an early positive connection and a later negative one Joseph Schumpeter in Capitalism Socialism and Democracy 1942 states atly History clearly con rms that mod ern democracy rose along with capitalism and in causal connec tion with it modern democracy is a product of the capitalist process He has a whole chapter entitled The Civilization of Capitalism democracy being a part of that civilization Schumpeter also makes the point that democracy was histori cally supportive of capitalism He states the bourgeoisie reshaped and from its own point of view rationalized the social and political structure that preceded its ascendancy that is to say feudalism The democratic method was the political tool of that reconstruction According to Schumpeter capital ism and democracy were mutually causal historically mutually supportive parts of a rising modern civilization although as we shall Show below he also recognized their antagonisms Barrington Moore s historical investigation 1966 with its long title The Social Origins of Dictatorship and Democracy Lord and Peasant in the Making of the Modern World argues that there have been three historical routes to industrial modem ization The rst of these followed by Britain France and the United States involved the subordination and transformation of the agricultural sector by the rising commercial bourgeoi sie producing the democratic capitalism of the 19th and 20th centuries The second route followed by Germany and Japan where the landed aristocracy was able to contain and dominate the rising commercial classes produced an authoritarian and fascist version of industrial modernization a system of capital ism encased in a feudal authoritarian framework dominated by a military aristocracy and an authoritarian monarchy The third route followed in Russia where the commercial bourgeoisie was too weak to give content and direction to the moderniz ing process took the form of a revolutionary process drawing on the frustration and resources of the peasantry and created a mobilized authoritarian Communist regime along with a state controlled industrialized economy Successful capitalism domi nating and transforming the rural agricultural sector according to Barrington Moore is the creator and sustainer of the emerg ing democracies of the nineteenth century Robert A Dahl the leading American democratic theorist in the new edition of his book 1990 After the Revolution Authority in a Good Society has included a new chapter entitled Democracy and Markets In the opening paragraph of that chapter he says It is an historical fact that modern democratic institutions have existed only in countries with predominantly privately owned marketoriented economies orcapitalism if you prefer that name It is also a fact that all socialist countries with predominantly stateowned centrally directed economic orders command economies have not enjoyed democratic governments but have in fact been ruled by authoritarian dictatorships It is also an historical fact that some capitalist countries have also been and are ruled by authoritarian dictatorships To put it more formally it looks to be the case that market oriented economies are necessary in the logical sense to democratic institutions though they are certainly not suf cient And it looks to be the case that stateowned centrally directed economic orders are strictly associated with authoritarian regirnes though authoritarianism de nitely does not require them We have something very much like an historical experiment so it would appear that leaves these conclusions in no great doubt Dahl 1990 Peter Berger in his book The Capitalist Revolution 1986 presents four propositions on the relation between capitalism and democracy Capitalism is a necessary but not sufficient condition of democracy under modern conditions If a capitalist economy is subjected to increasing degrees of state control a point not precisely specifiable at this time will be reached at which democratic governance becomes impossible If a socialist economy is opened up to increasing degrees of market forces a point not precisely specifiable at this time will be reached at which democratic governance becomes a possibility If capitalist development is successful in generating economic growth from which a sizable proportion of the population bene ts pressures toward democracy are likely to appear This positive relationship between capitalism and democ racy has also been sustained by statistical studies The Social Mobilization theorists of the 19503 and 1960s which included Daniel Lerner 1958 Karl Deutsch 1961 S M Lipset 1959 among others demonstrated a strong statistical associ ation between GNP per capita and democratic political institu tions This is more than simple statistical association There is a logic in the relation between level of economic development and democratii institutions Level of economic development has been shown to be associated with education and literacy exposure to mass media and democratic psychological pro pensities such as subjective efficacy participatory aspirations DOCUMENT ID 36914 and skills In a major investigation of the social psychology of industrialization and modernization a research team led by the sociologist Alex lnkeles 1974 interviewed several thousand workers in the modern industrial and the traditional economic sectors of six countries of differing culture Inkeles found empathetic ef cacious participatory and activist pro pensities much more frequently among the modern industrial workers and to a much lesser extent in the traditional sector in each one of these countries regardless of cultural differences The historical the logical and the statistical evidence for this positive relation between capitalism and democracy is quite persuasive Capitalism Subverts Democracy But the opposite case is also made that capitalism subverts or undermines democracy Already in John Stuart Mill 1848 we encounter a view of existing systems of private property as unjust and of the free market as destructiver competitive aesthetically and morally repugnant The case he was making was a normative rather than a political one He wanted a less competitive society ultimately socialist which would still respect individuality He advocated limitations on the inheri tance of property and the improvement of the property system so that everyone shared in its benefits the limitation of popula tion growth and the improvement of the quality of the labor force through the provision of high quality education for all by the state On the eve of the emergence of the modern democratic capitalist order John Staurt Mill wanted to control the excesses of both the market economy and the majoritarian polity by the education of consumers and producers citizens and politicians in the interest of producing morally improved free market and democratic orders But in contrast to Marx he did not thor oughly discount the possibilities of improving the capitalist and democratic order Marx argued that as long as capitalism and private prop erty existed there could be no genuine democracy that democ racy under capitalism was bourgeois democracy which is to say not democracy at all While it would be in the interest of the working classes to enter a coalition with the bourgeoisie in supporting this form of democracy in order toeliminate feudal ism this would be a tactical maneuver Capitalist democracy could only result in the increasing exploitation of the working classes Only the elimination of capitalism and private property could result in the emancipation of the working classes and the attainment of true democracy Once socialism was attained the basic political problems of humanity would have been solved through the elimination of classes Under socialism there would be no distinctive democratic organization no need for institu tions to resolve con icts since there would be no con icts There is not much democratic or political theory to be found in Marx s writings The basic reality is the mode of economic production and the consequent class structure from which other institutions follow For the followers of Marx up to the present day there con tinues to be a negative tension between capitalism however reformed and democracy But the integral Marxist and Leninist Article 38 Capitalism and Democracy rejection of the possibility of an autonomous bourgeois democratic state has been left behind for most Western Marxists In the thinking of Poulantzas Offe Bobbio Haberrnas and oth ers the bourgeois democratic state is now viewed as a class struggle state rather than an unambiguously bourgeois state The working class has access to it it can struggle for its inter ests and can attain partial bene ts from it The state is now viewed as autonomous or as relatively autonomous and it can be reformed in a progressive direction by working class and other popular movements The bourgeois democratic state can be moved in the direction of a socialist state by political action short of violence and institutional destruction Schumpeter 1942 appreciated the tension between capital ism and democracy While he saw a causal connection between competition in the economic and the political order he points out that there are some deviations from the principle of democracy which link up with the presence of organized capi talist interests The statement is true both from the stand point of the classical and from the standpoint of our own theory of democracy From the first standpoint the result reads that the means at the disposal of private interests are often used in order to thwart the will of the people From the second standpoint the result reads that those private means are often used in order to interfere with the working of the mechanism of competitive leadership He refers to some countries and situations in which political life all but resolved itself into a struggle of pres sure groups and in many cases practices that failed to conform to the spirit of the democratic method But he rejects the notion that there cannot be political democracy in a capitalist society For Schumpeter full democracy in the sense of the informed participation of all adults in the selection of political leaders and consequently the making of public policy was an impossibility because of the number and complexity of the issues confront ing modern electorates The democracy which was realistically possible was one in which people could choose among com peting leaders and consequently exercise some direction over political decisions This kind of democracy was possible in a capitalist society though some of its propensities impaired its performance Writing in the early years of World War II when the future of democracy and of capitalism were uncertain he leaves unresolved the questions of Whether or not democ racy is one of those products of capitalism which are to die out with it or how well or ill capitalist society quali es for the task of working the democratic method it evolved NonMarxist political theorists have contributed to this questioning of the reconcilability of capitalism and democracy Robert A Dahl who makes the point that capitalism histori cally has been a necessary precondition of democracy views contemporary democracy in the United States as seriously compromised impaired by the inequality in resources among the citizens But Dahl stresses the variety in distributive pat terns and in politicoeconomic relations among contempo 39 rary democracies The category of capitalist democracies he writes includes an extraordinary variety from nineteenth century laissez faire early industrial systems to twentieth cen tury highly regulated social welfare late or postindustrial sys tems Even late twentieth century welfare state orders vary all DOCUMENT ID 36914 ANNUAL EDITIONS the way from the Scandinavian systems which are redistribu tive heavily taxed comprehensive in their social security and neocorporatist in their collective bargaining arrangements to the faintly redistributive moderately taxed limited social security weak collective bargaining systems of the United States and Japan 1989 In Democracy and Its Critics 1989 Dahl argues that the nor mative growth of democracy to what he calls its third transfor mation the rst being the direct citystate democracy of classic times and the second the indirect representative inegalitarian democracy of the contemporary world will require democrati zation of the economic order In other words modern corporate capitalism needs to be transformed Since government control andor ownership of the economy would be destructive of the pluralism which is an essential requirement of democracy his preferred solution to the problem of the mega corporation is employee control of corporate industry An economy so orga nized according to Dahl would improve the distribution of polit ical resources without at the same time destroying the pluralism which democratic competition requires To those who question the realism of Dahl s solution to the problem of inequality he replies that history is full of surprises Charles E Lindblom in his book Politics and Markets 1977 concludes his comparative analysis of the political economy of modern capitalism and socialism with an essentially pessimis tic conclusion about contemporary marketoriented democracy He says We therefore come back to the corporation It is possible that the rise of the corporation has offset or more than offset the decline of class as an instrument of indoctrination That it creates a new core of wealth and power for a newly constructed upper class as well as an overpowering loud voice is also reasonably clear The executive of the large corporation is on many counts the contemporary counterpart to the landed gentry of an earlier era his voice amplified by the technology of mass communication The major institutional barrier to fuller democracy may therefore be the autonomy of the private corporation Lindblom concludes The large private corporation ts oddly into democratic theory and vision Indeed it does not t There is then a widely shared agreement from the Marxists and neoMarxists to Schumpeter Dahl Lindblom and other liberal political theorists that modern capitalism with the dominance of the large corporation produces a defective or an impaired form of democracy Democracy Subverts Capitalism If we change our perspective now and look at the way democ racy is said to affect capitalism one of the dominant traditions of economics from Adam Smith until the present day stresses the importance for productivity and welfare of an economy that is relatively free of intervention by the state In this doctrine of minimal government there is still a place for a framework of rules and services essential to the productive and ef cient 208 performance of the economy In part the government has to protect the market from itself Left to their own devices accord ing to Smith businessmen were prone to corner the market in order to exact the highest possible price And according to Smith businessmen were prone to bribe public officials in order to gain special privileges and legal monopolies For Smith good capi talism was competitive capitalism and good government pro vided just those goodsand services which the market needed to ourish could not itself provide or would not provide A good government according to Adam Smith was a minimal govern ment providing for the national defense and domestic order Particularly important for the economy were the rules pertain ing to commercial life such as the regulation of weights and measures setting and enforcing building standards providing for the protection of persons and property and the like For Milton Friedman 1961 1981 the leading contempo rary advocate of the free market and free government and of the interdependence of the two the principal threat to the survival of capitalism and democracy is the assumption of the respon sibility for welfare on the part of the modern democratic state He lays down a set of functions appropriate to government in the positive interplay between economy and polity and then enumerates many of the ways in which the modern welfare regulatory state has deviated from these criteria A good Friedmanesque democratic government would be one which maintained law and order defended property rights served as a means whereby we could modify property rights and other rules of the economic game adjudicated disputes about the interpretation of the rules enforced contracts promoted compe tition provided a monetary framework engaged in activities to counter technical monopolies and to overcome neighborhood effects widely regarded as suf ciently important to justify gov ernment intervention and which supplemented private charity and the private family in protecting the irresponsible whether madman or child Against this list of proper activities for a free government Friedman pinpointed more than a dozen activi ties of contemporary democratic governments which might bet ter be performed through the private sector or not at all These included setting and maintaining price supports tariffs import and export quotas and controls rents interest rates wage rates and the like regulating industries and banking radio and tele vision licensing professions and occupations providing social security and medical care programs providing public housing national parks guaranteeing mortgages and much else Friedman concludes that this steady encroachment on the private sector has been slowly but surely converting our free government and market system into a collective monster com promising both freedom and productivity in the outcome The tax and expenditure revolts and regulatory rebellions of the 1980s have temporarily stemmed this trend but the threat con tinues It is the internal threat coming from men of good inten tions and good will who wish to reform us Impatient with the slowness of persuasion and example to achieve the great social changes they envision they are anxious to use the power of the state to achieve their ends and con dent of their own ability to do so The threat to political and economic freedom according to Milton Friedman and otherswho argue the same position DOCUMENT ID 36914 arises out of democratic politics It may only be defeated by 7 political action In the last decades a school or rather several schools of econ omists and political scientists have turned the theoretical models of economics to use in analyzing political processes Variously called public choice theorists rational choice theorists or positive political theorists and employing such models as mar ket exchange and bargaining rational self interest game theory and the like these theorists have produced a substantial litera ture throwing new and often controversial light on democratic political phenomena such as elections decisions of political party leaders interest group behavior legislative and committee decisions bureaucratic and judicial behavior lobbying activ ity and substantive public policy areas such as constitutional arrangements health and environment policy regulatory policy national security and foreign policy and the like Hardly a eld of politics and public policy has been left untouched by this inventive and productive group of scholars The institutions and names with which this movement is associated in the United States include Virginia State University the University of Virginia the George Mason University the University of Rochester the University of Chicago the California Institute of Technology the Carnegie Mellon University among others And the most prominent names are those of the leaders of the two principal schools James Buchanan the Nobel Laureate leader of the Virginia Public Choice school and William Riker the leader of the Rochester Positive Theory school Other prominent scholars associated with this work are Gary Becker of the University of Chicago Kenneth Shepsle and Morris Fiorina of Harvard John Ferejohn of Stanford Charles Plott of the California Institute of Technology and many others One writer summarizing the ideological bent of much of this work but by no means all of it William Mitchell of the University of Washington describes it as scally conservative sharing a conviction that the private economy is far more robust ef cient and perhaps equitable than other economies and much more successful than political processes in ef ciently allocating resources Much of what has been produced by James Buchanan and the leaders of this school can best be described as contributions to a theory of the failure of political processes These failures of political performance are said to be inherent properties of the democratic political pro cess inequity inefficiency and coercion are the most general results of democratic policy formation In a democracy the demand for publicly provided services seems to be insatiable It ultimately turns into a special interest rent seeking society Their remedies take the form of proposed constitutional limits on spending power and checks and balances to limit legislative majorities One of the most visible products of this pessimistic eco nomic analysis of democratic politics is the book by Mancur Olson The Rise and Decline of Nations 1982 He makes a strong argument for the negative democracy capitalism con nection His thesis is that the behavior of individuals and rms in stable societies inevitably leads to the formation of dense net works of collusive cartelistic and lobbying organizations that 209 Article 38 Capitalism and Democracy make economies less efficient and dynamic and politics less governable The longer a society goes without an upheaval the more powerful such organizations become and the more they slow down economic expansion Societies in which these narrow interest groups have been destroyed by war or revolu tion for example enjoy the greatest gains in growth His prize cases are Britain on the one hand and Germany and Japan on the other The logic of the argument implies that countries that have had democratic freedom of organization without upheaval or invasion the longest will suffer the most from growthrepressing organizations and combinations This helps explain why Great Britain the major nation with the longest immunity from dictatorship invasion and revolution has had in this century a lower rate of growth than other large developed democracies Britain has precisely the powerful network of special interest organization that the argument developed here would lead us to expect in a country with its record of military security and democratic stability The number and power of its trade unions need no description The venerability and power of its professional associations is also striking In short with age British society has acquired so many strong organizations and collusions that it suffers from an institutional sclerosis that slows its adaptation to changing circumstances and technologies Olson 1982 By contrast post World War 11 Germany and Japan started organizationally from scratch The organizations that led them to defeat were all dissolved and under the occupation inclusive organizations like the general trade union movement and general organizations of the industrial and commercial community were rst formed These inclusive organizations had more regard for the general national interest and exercised some discipline on the narrower interest organizations And both countries in the post war decades experienced miracles of economic growth under democratic conditions The Olson theory of the subversion of capitalism through the propensities of democratic societies to foster special interest groups has not gone without challenge There can be little ques tion that there is logic in his argument But empirical research testing this pressure group hypothesis thus far has produced mixed ndings Olson has hopes that a public educated to the harmful consequences of special interests to economic growth full employment coherent government equal opportunity and social mobility will resist special interest behavior and enact legislation imposing antitrust and anti monopoly controls to mitigate and contain these threats It is somewhat of an irony that the solution to this special interest disease of democ racy according to Olson is a democratic state with sufficient regulatory authority to control the growth of special interest organizations Democracy Fosters Capitalism My fourth theme democracy as fostering and sustaining capi talism is not as straightforward as the first three Historically DOCUMENT ID 36914 ANNUAL EDITIONS there can be little doubt that as the suffrage was extended in the last century and as mass political parties developed demo cratic development impinged signi cantly on capitalist insti tutions and practices Since successful capitalism requires risk taking entrepreneurs with access to investment capital the democratic propensity for redistributive and regulative policy tends to reduce the incentives and the resources available for risk taking and creativity Thus it can be argued that propensi ties inevitably resulting from democratic politics as Friedman Olson and many others argue tend to reduce productivity and hence welfare But precisely the opposite argument can be made on the basis of the historical experience of literally all of the advanced capi talist democracies in existence All of them without exception are now welfare states with some form and degree of social insurance health and welfare nets and regulatory frameworks designed to mitigate the harmful impacts and shortfalls of capi talism Indeed the welfare state is accepted all across the politi cal spectrum Controversy takes place around the edges One might make the argument that had capitalism not been modi ed in this welfare direction it is doubtful that it would have survived This history of the interplay between democracy and capi talism is clearly laid out in a major study involving European and American scholars entitled The Development of Welfare States in Westem Europe and America Flora and Heidenheirner 1981 The book lays out the relationship between the devel opment and spread of capitalist industry democratization in the sense of an expanding suffrage and the emergence of trade unions and leftwing political parties and the gradual intro duction of the institutions and practices of the welfare state The early adoption of the institutions of the welfare state in Bismarck Germany Sweden and Great Britain were all associ ated with the rise of trade unions and socialist parties in those countries The decisions made by the upper and middle class leaders and political movements to introduce welfare measures such as accident old age and unemployment insurance were strategic decisions They were increasingly confronted by trade union movements with the capacity of bringing industrial pro duction to a halt and by political parties with growing parlia mentary representation favoring fundamental modi cations in or the abolition of capitalism As the calculations of the upper and middle class leaders led them to conclude that the costs of suppression exceeded the costs of concession the various parts of the welfare state began to be put in place accident sick ness unemployment insurance old age insurance and the like The problem of maintaining the loyalty of the working classes through two world wars resulted in additional concessions to working class demands the lling out of the social security sys tem free public education to higher levels family allowances housing bene ts and the like Social conditions historical factors political processes and decisions produced different versions of the welfare state In the United States manhood suffrage came quite early the later bar gaining process emphasized free land and free education to the secondary level an equality of opportunity version of the well fare state The Disraeli bargain in Britain resulted in relatively 210 early manhood suffrage and the full attainment of parliamentary government while the Lloyd George bargain on the eve of World War I brought the beginnings of a welfare system to Britain The Bismarck bargain in Germany produced an early welfare state a postponement of electoral equality and parliamentary government While there were all of these differences in his torical encounters with democratization and welfarization the important outcome was that little more than a century after the process began all of the advanced capitalist democracies had similar versions of the welfare state smaller in scale in the case of the United States and Japan more substantial in Britain and the continental European countries We can consequently make out a strong case for the argument that democracy has been supportive of capitalism in this stra tegic sense Without this welfare adaptation it is doubtful that capitalism would have survived or rather its survival unwel farized would have required a substantial repressive apparatus The choice then would seem to have been between democratic welfare capitalism and repressive undemocratic capitalism I am inclined to believe that capitalism as such thrives more with the democratic welfare adaptation than with the repressive one It is in that sense that we can argue that there is a clear positive impact of democracy on capitalism We have to recognize in conclusion that democracy and capitalism are both positively and negatively related that they both support and subvert each other My colleague Moses Abramovitz described this dialectic more surely than most in his presidential address to the American Economic Association in 1980 on the eve of the Reagan Revolution Noting the decline in productivity in the American economy during the lat ter 19603 and 703 and recognizing that this decline might in part be attributable to the tax transfer and regulatory tenden cies of the welfare state he observes The rationale supporting the development of our mixed economy sees it as a pragmatic compromise between the competing virtues and defects of decentralized market capitalism and encompassing socialism Its goal is to obtain a measure of distributive justice security and social guidance of economic life without losing too much of the allocative efficiency and dynamism of private enterprise and market organization And it is a pragmatic compromise in another sense It seeks to retain for most people that measure of personal protection from the state which private property and a private job market confer while obtaining for the disadvantaged minority of people through the state that measure of support without which their lack of property or personal endowment would amount to a denial of individual freedom and capacity to function as full members of the community Abramovitz 1981 Democratic welfare capitalism produces that reconciliation of opposing and complementary elements which makes possi ble the survival even enhancement of both of these sets of insti tutions It is not a static accommodation but rather one which uctuates over time with capitalism being compromised by the taxtransferregulatory action ofthe state at one point and then DOCUMENT ID 36914 correcting in the direction of the reduction of the intervention of the state at another point and with a learning process over time that may reduce the amplitude of the curves The case for this resolution of the capitalismdemocracy quandary is made quite movingly by Jacob Viner who is quoted in the concluding paragraph of Abramovitz s paper If l nevertheless conclude that I believe that the welfare state like old Siwash is really worth ghting for and even dying for as compared to any rival system it is because despite its imper fection in theory and practice in the aggregate it provides more promise of preserving and enlarging human reedoms temporal prosperity the extinction of mass misery and the dignity of man and his moral improvement than any other social system which has previously prevailed which prevails elsewhere today or which outside Utopia the mind of man has been able to provide a blueprint for Abramovitz 1981 References Abramovitz Moses 1981 Welfare Quandaries and Productivity Concerns American Economic Review March Berger Peter 1986 The Capitalist Revolution New York Basic Books Dahl Robert A 1989 Democracy and Its Critics New Haven Yale University Press 1990 After the Revolution Authority in a Good Society New Haven Yale University Press Deutsch Karl 1961 Social Mobilization and Political Development American Political Science Review 55 Sept Flora Peter and Arnold Heidenheimer 1981 The Development of Article 38 Capitalism and Democracy Welfare States in Western Europe and America New Brunswick NJ Transaction Press Friedman Milton 1981 Capitalism and Freedom ChiCago University of Chicago Press Hirschman Albert 1986 Rival Views ofMorket Society New York Viking Inkeies Alex and David Smith 1974 Becoming Modern Individual Change in Six Developing Countries Cambridge MA Harvard University Press Lerner Daniel 1958 The Passing of Traditional Society New York Free Press Lindblom Charles E 1977 Politics and Markets New York Basic Books Lipset Seymour M 1959 Some Social Requisites of Democracy American Political Science Review 53 September Mill John Stuart 1848 1965 Principles of Politico Economy 2 vols Toronto University of Toronto Press Mitchell William 1988 Virginia Rochester and Bloomington TwentyFive Years of Public Choice and Political Science Public Choice 56 101 119 Moore Barrington 1966 The Social Origins of Dictatorship and Democracy New York Beacon Press Olson Mancur 1982 The Rise and Decline of Nations New Haven Yale University Press Schumpeter Joseph 1946 Capitalism Socialism and Democracy New York Harper GABRIEL A ALMOND professor of political science emeritus at Stanford University is a former president of the American Political Science Association From PS Political Science and Politics September 1991 pp 467474 Copyright 1991 by American Political Science Association Reprinted by permissxon 211 DOCUMENT ID 36914 NOTE This bill has been prepared for the signature of the appropriate legislative officers and the Governor To determine whether the Governor has signed the bill or taken other action on it please consult the legislative status sheet the legislative history or the Session Laws A 439 ag HOUSE BILL 101191 BY REPRESENTATIVES Pommer Bene eld Frangas Hullinghorst Judd Kagan Labuda Levy Merri eld Middleton Schafer S Todd Tyler Court also SENATORS Heath CONCERNING THE NARROWING OF THE EXISTING EXEMPTION FROM THE STATE SALES AND USE TAXES FOR FOOD AND IN CONNECTION THEREWITH SUBJECTING CANDY AND SOFT DRINKS TO THE STATE SALES AND USE TAXES AND MAKING AN APPROPRIATION THEREFOR Be it enacted by the General Assembly of the State of Colorado SECTION 1 3926707 Colorado Revised Statutes is amended BY THE ADDITION OF A NEW SUB SECTION tO read 3926707 Food meals and beverages de nitions 15 a NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH e OF SUBSECTION 1 OF THIS SECTION ON AND AFTER MAY 1 2010 SALES OF CANDY AND SOFT DRINKS SHALL BE SUBJECT TO STATE SALES TAXATION b FOR THE PURPOSES OF THIS SUBSECTION 15 I quotCANDYquot MEANS A PREPARATION OF SUGAR HONEY OR OTHER Capital letters indicate new material added to existing statutes dashes through words indicate deletions from existing statutes and such material not part of act NATURAL OR ARTIFICIAL SWEETENERS IN COMBINATION WITH CHOCOLATE FRUIT NUTS OR OTHER INGREDIENTS OR FLAVORINGS IN THE FORM OF BARS DROPS OR PIECES quotCANDYquot SHALL NOT INCLUDE ANY PREPARATION CONTAINING FLOUR AND SHALL REQUIRE NO REFRIGERATION II quotSOFT DRINKS MEANS NONALCOHOLIC BEVERAGES THAT CONTAIN NATURAL OR ARTIFICIAL SWEETENERS quotSOFT DRINKS DO NOT INCLUDE BEVERAGES THAT CONTAINMILK OR MILK PRODUCTS SOY RICE OR SIMILAR MILK SUBSTITUTES OR GREATER THAN FIFTY PERCENT OF VEGETABLE OR FRUIT IUICE BY VOLUME SECTION 2 3926707 2 d Colorado Revised Statutes is amended and the said 3926707 is further amended BY THE ADDITION OF A NEW SUBSECTION to read 3926707 Food meals and beverages de nitions 2 The following shall be exempt from taxation under the provisions of part 2 of this article d I Effective January 1 1980 the storage use or consumption of food as defined in section 3926 102 45 EXCEPT THAT ON AND AFTER MAY 1 2010 THE STORAGE USE OR CONSUMPTION OF CANDY AND SOFT DRINKS SHALL BE SUBJECT TO STATE USE TAXATION 11 FOR THE PURPOSES OF THIS PARAGRAPH d A quotCANDYquot MEANS A PREPARATION OF SUGAR HONEY OR OTHER NATURAL OR ARTIFICIAL SWEETENERS IN COMBINATION WITH CHOCOLATE FRUIT NUTS OROTHERINGREDIENTS ORFLAVORINGS IN THE FORM OF BARS DROPS OR PIECES quotCANDYquot SHALL NOT INCLUDE ANY PREPARATION CONTAINING FLOUR AND SHALL REQUIRE NO REFRIGERATION B quotSOFT DRINKSquot MEANS NONALCOHOLIC BEVERAGES THAT CONTAIN NATURAL OR ARTIFICIAL SWEETENERS quotSOFT DRINKSquot DO NOT INCLUDE BEVERAGES THAT CONTAIN MILK OR MILK PRODUCTS SOY RICE OR SIMILAR MILK SUBSTITUTES OR GREATER THAN FIFTY PERCENT OF VEGETABLE OR FRUIT JUICE BY VOLUME 3 THE DEPARTMENT OF REVENUE MAY PROMULGATE RULES IN ACCORDANCE WITH ARTICLE 4 OF TITLE 24 C R S TO PROVIDE A MEANS BY PAGE 2HOUSE BILL 101191 WHICH A PERSON WHO SELLS CANDY OR SOFT DRINKS AT RETAIL MAY IF NECESSARY REASONABLY ESTIMATE THE AMOUNT OF SALES TAXES DUE ON SUCH CANDY AND SOFT DRINKS FOR ANY RETURN MADE PRIOR TO AUGUST 1 20 10 APERSON WHO SELLS CANDY OR SOFT DRINKS AT RETAIL SHALL NOT BE LIABLE FOR ANY INTEREST OR OTHER PENALTY IMPOSED AS A RESULT OF AN ERROR MADE IN CONNECTION WITH THE ELIMINATION OF THE EXEMPTION FROM STATE SALES TAX FOR SALES OF CANDY AND SOFT DRINKS AS DEFINED IN PARAGRAPH b OF SUBSECTION 15 OF THIS SECTION BY HOUSE BILL 101 191 ENACTED IN2010 SECTION 3 39267 14 2 and 3 Colorado Revised Statutes are amended and the said 3926714 is further amended BY THE ADDITION OF THE FOLLOWING NEW SUBSECTIONS to read 3926714 Vending machines de nitions 2 On and after January 1 2000 all sales and purchases of food as defined in section 3926102 45 by or through vending machines shall be exempt from taxation under the provisions of part 1 of this article EXCEPT THAT ON AND AFTER MAY 12010 SALESAND PURCHASES OF CANDYAND SOFT DRINKS BY OR THROUGH VENDING MACHINES SHALL BE SUBJECT TO STATE SALES TAXATION ABSENT AN ERRESS PROVISION 1N THE CONTRACT TO quotHIE CONTRARY ANY VENDING MACHINE CONTRACT THAT REFERENCES THE PRICE AT WHICH PRODUCTS SHALL BE SOLD FROM A VENDlNG MACHINE SHALL BE lNTERPRETED TO INCLUDE ANY APPLICABLE SALES TAX AS AN ADDITION TO THE REFERENCED PRICE 3 On and after January 1 2000 the storage use or consumption of food as defined in section 3926102 45 purchased by or through vending machines shall be exempt from taxation under the provisions of part 2 of this article EXCEPT THAT ON AND AFTER MAY 1 2010 THE STORAGE USE OR CONSUIWPTION OF CANDY AND SOFT DRINKS PURCHASED BY OR THROUGH VENDING MACHINES SHALL BE SUBJECT TO STATE USE TAXATION 4 FOR THE PURPOSES OF THIS SECTION a quotCANDYquot MEANS A PREPARATION OF SUGAR HONEY OR OTHER NATURAL OR ARTIFICIAL SWEETENERS IN COMBINATION WITH CHOCOLATE FRUIT NUTS OR OTHER INGREDIENTS ORFLAVORJNGS IN THE FORM OF BARS DROPS OR PIECES quotCANDYquot SHALL NOT INCLUDE ANY PREPARATION PAGE 3HOUSE BILL 101191 CONTAINING FLOUR AND SHALL REQUIRE NO REFRIGERATION b quotSOFT DRINKS MEANS NONALCOHOLIC BEVERAGES THAT CONTAIN NATURAL OR ARTIFICIAL SWEETENERS quotSOFT DRINKS DO NOT INCLUDE BEVERAGES THAT CONTAINMILK OR MILK PRODUCTS SOY RICE OR SIMILAR MILK SUBSTITUTES OR GREATER THAN FIFTY PERCENT OF VEGETABLE OR FRUIT IUTCE BY VOLUME 5 THE DEPARTMENT OF REVENUE SHALL PROMULGATE RULES IN ACCORDANCE WITH ARTICLE 4 OF TITLE 24 C R S TO PROVIDE A MEANS BY WHICH A PERSON WHO SELLS CANDY OR SOFT DRINKS PURCHASED BY AND THROUGH VENDINGMACHINES MAY IFNECESSARY REASONABLYESTIMATE THE AMOUNT OF SALES TAXES DUE ON SUCH CANDY AND SOFT DRINKS FOR ANY RETURN MADE PRIOR TO AUGUST 12010 APERSON WHO SELLS CANDY OR SOFT DRINKS AT RETAIL SHALL NOT BE LIABLE FOR ANY INTEREST OR OTHER PENALTY IMPO SED AS A RESULT OF AN ERROR MADE IN CONNECTION WITH THE ELIMINATION OF THE EXEMPTION FROM STATE SALES TAX FOR SALES OF CANDY AND SOFT DRINKS AS DEFINED IN SUBSECTION 4 OF THIS SECTION BY HOUSE BILL 101191 ENACTED IN 2010 SECTION 4 Part 1 of article 21 of title 39 Colorado Revised Statutes is amended BY THE ADDITION OF A NEW SECTION to read 3921122 Revenue impact of 2010 tax legislation tracking by department THE DEPARTMENT OF REVENUE SHALL ACCOUNT FOR ALL REVENUE ATTRIBUTABLE TO THE ENACTMENT OF HOUSE BILL 101191 ENACTED IN 2010 AND SHALL TO THE EXTENT SUCH INFORMATION IS AVAILABLE MAKE QUARTERLY REPORTS TO THE GENERAL ASSEMBLY REGARDING THE QUARTERLY AND CUMULATIVE NET REVENUE GAIN TO THE STATE RESULTING FROM THE ENACTMENT OF SAID BILL SECTION 5 Part 1 of article 26 of title 39 Colorado Revised Statutes is amended BY THE ADDITION OF A NEW SECTION to read 3926127 Legislation modifying the state sales tax base n0 ianact on local government sales tax bases n0 expansion of local authority to levy sales tax 1 NOTWITHSTANDING THE PROVISIONS OF SECTION 292 105 1 d CRS ANY PROVISION OF TITLE 32 CRS OR ANY OTHER PROVISION OF LAW THE LEVYlN G OF SALES TAX ON EEMPTION FROM SALES TAXF OR ORLOCAL OPTION TO LEVY SALES TAX ON OR PROVIDE PAGE 4HOUSE BILL 101191 AN EXEMPTION FROM SALES TAX FOR ANY TANGIBLE PERSONAL PROPERTY OR SERVICES UNDER THE SALES TAX ORDINANCE OR RESOLUTION OF ANY COUNTY MINICIPALITY SPECIAL DISTRICT AUTHORITY OR OTHER LOCAL GOVERNMENT OR POLITICAL SUBDIVISION OF THE STATE SHALL NOT BE AFFECTED IN ANY WAY B Y THE ELlMINATION SUSPENSION OR MODIFICATION OF ANY SALES TAX EDGEMPTION OR ANY OTHER LEGISLATIVE MODIFICATION OF THE STATE SALES TAX BASE RESULTING FROM THE ENACTMENT OF ANY OF THE FOLLOWING BILLS a HOUSE BILL 101191 ENACTED IN 2010 2 THIS SECTIONDOES NOT CREATE OR EDQAND AND SHALL NOT BE CONSTRUED TO CREATE OR BRAND ANY AUTHORITY OF ANY COUNTY MINICIPALITY SPECIAL DISTRICT AUTHORITY OR OTHER LOCAL GOVERNMENT OR POLITICAL SUBDIVISION OF THE STATE TO LEVY SALES TAX SECTION 6 Part 2 of article 26 of title 39 Colorado Revised Statutes is amended BY THE ADDITION OF A NEW SECTION to read 3926212 Legislation modifying the state use tax base no impact on local government use tax bases n0 expansion of local authority to levy use tax 1 NOTWITHSTANDING THE PROVISIONS OF SECTION 292105 1 d CRS ANY PROVISION OF TITLE 32 CRS OR ANY OTHER PROVISION OF LAW THE LEVYING OF USE TAX ON EmMPTION FROM USE TAX FOR OR LOCAL OPTION TO LEVY USE TAX ON OR PROVIDE AN EEMPTION FROM USE TAX FOR ANY TANGIBLE PERSONAL PROPERTY OR SERVICES UNDER THE USE TAX ORDINANCE OR RESOLUTION OF ANY COUNTY IVIUNICIPALITY SPECIAL DISTRICT AUTHORITY OR OTHER LOCAL GOVERNI4ENT OR POLITICAL SUBDIVISION OF THE STATE SHALL NOT BE AFFECTED INANY WAY BY THE ELMNATION SUSPENSION OR MODIFICATION OF ANY USE TAX EEMPTION OR ANY OTHER LEGISLATIVE MODIFICATION OF THE STATE USE TAX BASE RESULTING FROM THE ENACTMENT OF ANY OF THE FOLLOWING BILLS a HOUSE BILL 101191 ENACTED IN2010 2 THIS SECTION DOES NOT CREATE OR EXPAND AND SHALL NOTBE CONSTRUED TO CREATE OR EXPAND ANY AUTHORITY OF ANY COUNTY MUNICIPALITY SPECIAL DISTRICT AUTHORITY OR OTHER LOCAL GOVERNMENT OR POLITICAL SUBDIVISION OF THE STATE TO LEVY USE TAX PAGE 5HOUSE BILL 101191 SECTION 7 Part 1 of article 75 of title 24 Colorado Revised Statutes is amended BY THE ADDITION OF A NEW SECTION to read 2475113 2010 bills to increase state revenue prohibition on hiring of new state employees NO MONEYS DERIVED FROM THE INCREASE IN STATE REVENUES RESULTING FROMTHEPASSAGE OF HOUSE BILL 101 191 ENACTED IN 2010 SHALL BE APPROPRIATED FOR THE PURPOSE OF FUNDING ADDITIONAL FULLTIME EQUIVALENT STATE EMPLOYEES SECTION 8 Appropriation In addition to any other appropriation there is hereby appropriated out of any moneys in the general fund not otherwise appropriated to the department of revenue for allocation to the taxation business group taxation and compliance division for the scal year beginning July 1 2009 the sum of ninetyfour thousand three hundred twentytwo dollars 94322 and 09 FTE or so much thereof as may be necessary for the implementation of this act SECTION 9 Safety clause The general assembly hereby nds PAGE 6HOUSE BILL 101191 determines and declares that this act is necessary for the immediate preservation of the public peace health and safety Terrance D Carroll Brandon C Shaffer SPEAKER OF THE HOUSE PRESIDENT OF OF REPRESENTATIVES THE SENATE Marilyn Eddins Karen Goldman CHIEF CLERK OF THE HOUSE SECRETARY OF OF REPRESENTATIVES THE SENATE APPROVED Bill Ritter Jr GOVERNOR OF THE STATE OF COLORADO PAGE 7HOUSE BILL 101191 Summarized History for Bill Number HBlO1191 From httpwwwlegstatecous The date the bill passed to the committee of the whole reflects the date the bill passed out of committee 01222010 Introduced In House Assigned to Finance Appropriations 01l27l2010 House Committee on Finance Refer Amended to House Committee of the Whole 01l27l2010 House Committee on Appropriations Refer Amended to Finance 01292010 House Second Reading Special Order Passed with Amendments 02012010 House Third Reading Passed 02022010 Introduced n Senate Assigned to Finance Appropriations 02032010 Senate Committee on Finance Refer Amended to Appropriations 02052010 Senate Committee on Appropriations Refer Unamended to Senate Committee of the Whole 02082010 Senate Second Reading Special Order Passed with Amendments 02102010 Senate Third Reading Passed with Amendments 02112010 House Considered Senate Amendments Result was to Lay Over Daily 02162010 House Considered Senate Amendments Result was to Concur Repass 02232010 Signed by the President of the Senate 02232010 Signed by the Speaker of the House 02232010 Sent to the Governor 02242010 Governor Action Signed Page 2 HB101191 February 2 2010 The bill requires candy and soft drink purchases to be exempt from statutory local govemments39 sales tax unless the local government expressly decides to subject candy and soft drinks to its sales tax If a local government decides to tax candy and soft drinks the effective date of such change must be either January 1 or July 1 and the local government must notify the Department of Revenue at least 45 days before the effective date State Revenue This bill will increase General Fund revenue by 14 million in FY 200910 180 million in FY 201011 and 180 million in FY 201 1 12 The revenue estimate for FY 200910 represents a partialyear impact The revenue impact in FY 201112 is affected by the reimposition of the vendor fee Under current law vendors will begin retaining 333 percent of the taxes they collect on July 1 2011 which will serve to reduce the sales tax amount remitted to the state The revenue estimates are based on data on the average amount of household expenditures in the western region of the United States on candy and soft drinks This data was obtained from the Consumer Expenditure Survey published by the Us Bureau of Labor Statistics According to the data households in the western region spend an average of about 300 annually on candy and soft drinks for offpremises consumption and through purchases from vending machines The number of households in Colorado projected by the State Demography Office was also used to estimate the total statewide amount of household purchases on candy and soft drinks State Expenditures Department of Revenue 95892 and 09 F TE in FY 2009 10 The Department of Revenue will incur onetime expenses in FY 2009 10 to notify vendors that candy and soft drinks will be subj ect to the state sales tax The department anticipates personnel costs to answer questions from vendors regarding the change The department will also incur additional General Fund information technology costs to adjust the state39s computer systems No appropriation for these information technology costs is necessary because of ongoing appropriations to the department for computer programming provided in the Long Bill for new legislation Table 1 summarizes costs incurred by the Department of Revenue Economies of scale It should be noted that there are several pieces of legislation currently proposed that if enacted would affect sales and use tax account holders If multiple bills are enacted no separate appropriation may be required by this bill The department will send one letter two pages in length to each sales and use tax account holder advising them of all enacted changes rather than sending one notification for each legislative change It is assumed that the Department of Revenue can absorb the costs of providing information on the amount of money fore gone by taxpayers to the extent that data are available using their current information systems Page 3 HB101191 February 2 2010 Table 1 Expenditures Under HB 10 1191 Cost Components FY 2009 2010 Information Technology Services 1570 Personal Services 36239 FT E 09 Operating Expenses Printing 5999 Postage 52084 TOTAL 95892 Local Government Impact Statecollected local governments currently have the option to subject purchases of food for offpremises consumption including candy and soft drinks to their local sales tax For those local jurisdictions that currently tax such purchases this scal note assumes that the bill will require them to exempt candy and soft drinks from their sales tax starting May 1 2010 resulting in a decline in revenue Candy and soft drinks will remain exempt from all local sales tax unless local jurisdictions choose to eliminate the exemption The earliest date in which a local government can apply its sales tax to candy and soft drinks would be July 1 2010 State Appropriations For FY 200910 the bill requires a General Fund appropriation of 94322 and 09 FTE for the Department of Revenue If multiple sales and use tax bills are enacted no separate appropriation may be necessary for this bill Departments Contacted Revenue HB101 19 1 JBC STAFF FISCAL ANALYSIS SENATE APPROPRIATIONS COMMITTEE CONCERNING THE NARROW1NG OF THE EXISTlNGEXEMPTION FROM THE STATE SALESAND USE TAXES FOR FOOD AND N CONNECTION THEREWTTH SUBJECTING CANDY AND SOFT DRINKS TO THE STATE SALES AND USE TAXES AND MAKING AN APPROPRIATION THEREFOR Prime Sponsors Representative Pommer JBC Analyst David Meng Senator Heath Phone 3038662061 Date Prepared February 4 2010 Summary of Amendments Made to the Bill After the 020210 Legislative Council Staff Revised Fiscal Note Was Prepared Amended by the Senate Finance Committee 0203101 The Senate Finance Committee Report modi es the language specifying that local jurisdictions that levy sales and use taxes shall not be affected in any way by the elimination suspension or modi cation of any sales and use tax base resulting from the enactment of this bill nor does the bill expand the authority of any local jurisdiction to levy sales and use taxes The report also speci es that sales of candy and soft drinks shall be subject to sales taxation from May 1 2010 to June 30 2013 These changes do not affect the scal impact of the bill described inthe attached Legislative Council Revised Fiscal Note Legislative Council Staff agrees with this assessment JBC Staff Concurrence with Le islative Council Staff Fiscal Note Concurs Does Not Concur Updated Analysis A I A 39Annronriation Status The bill includes an appropriation clause that provides an appropriation of 94322 General Fund and 09 FTE to the Department of Revenue for FY 200910 for implementation of this bill The appropriation clause for this bill is independent of the enactment of any other bill If other similar bills affecting sales tax exemptions are enacted with the same effective date the aggregate costs of implementing those bills will be combined and the aggregate expenditure is expected to be the cost of one enacted bill Ifmore than one bill passes regarding sales tax exemptions the total appropriation will be reduced through a provision in the 2010 Long Bill The bill will require 1570 General Fund for programming costs to adjust the state s computer systems for the elimination of this exemption The Department of Revenue does not require an appropriation for the programming costs in the bill because the FY 200910 Long Bill includes an HB101191 JBC Staff Analysis Page 2 appropriation to the Department of Revenue to implement legislation that requires computer programming hours This appropriation will require an adjustment through a provision in the 2010 Long Bill in order to cover the expenditures required by this bill and any other similar bills that pass Bill Sponsor Amendments Staff is not aware of any sponsor amendments to be offered Points to Consider None COMMITTEE ON LEGAL SERVICES Sen John Morse Chair Rep Jeanne Labuda Vice Chair Rep Bob Gardner Rep Daniel Kagan Rep Claire Levy Rep Ellen Roberts Sen Greg Brophy Sen Morgan Carroll Sen Shawn Mitchell Sen Gail Schwartz DIRECTOR Charles W Pike DEPUTY DIRECTORS Dan L Cartin Sharon L Eubanks REVISOR OF STATUTES Jennifer G Gilroy SENIOR ATTORNEYS Gregg W Fraser Deborah F Haskins BartW Miller Julie A Pelegrin SENIOR STAFF ATTORNEYS Jeremiah B Barry Christine B Chase Edward A DeCecco Michael J Dohr Kristen J Forrestal Duane H Gall Jason Gelender Robert S Lackner Thomas Morris Nicole S Myers Jery Payne Esther van Mourik SENIOR STAFF ATTORNEY FOR RULE REVIEW Charles Brackney SENIOR STAFF ATTORNEY FOR ANNOTATIONS Michele D Brown STAFF ATTORNEYS Troy Bratton Brita Darling Kate Meyer Jane M Ritter Richard Sweetman PUBLICATIONS COORDINATOR Kathy Zambrano Attachment B OFFICE OF LEGISLATIVE LEGAL SERVICES COLORADO GENERAL ASSEMBLY STATE CAPITOL BUILDING ROOM 091 200 EAST COLFAx AVENUE DENVER COLORADO 802031782 IQEKSYXIJDHEDJIAJNIJDJ TO Members of the General Assembly FROM Office of Legislative Legal Services DATE November 12 2009 SUBJECT Test to be applied to determine whether prior voter approval is required for a tax policy change directly causing a net tax revenue gain to any district1 Section 20 of article X of the state constitution TAB OR requires prior voter approval in advance for a quottax policy change directly causing a net tax revenue gain to any districtquot2 This phrase is an undefined catchall that encompasses any district3 taxing action that is not covered by any of the more specific tax actions set forth in TABOR4 Based upon an analysis of the cases decided by Colorado courts most notably the Colorado Supreme Court decision in Mesa County Bd of Comm 39rS v State 203 P3d 519 Colo 2009 we have formulated the following test that can be used to determine whether a change in tax policy set forth in the Colorado Revised Statutes requires prior voter 1 This legal memorandum results from a request made to the Of ce of Legislative Legal Services OLLS a staff agency ofthe General Assembly OLLS legal memoranda do not represent an official legal position of the General Assembly or the State of Colorado and do not bind the members of the General Assembly They are intended for use in the legislative process and as information to assist the members in the performance oftheir legislative duties Consistent with the OLLS39 position as a staff agency ofthe General Assembly OLLS legal memoranda generally resolve doubts about whether the General Assembly has authority to enact a particular piece of legislation in favor of the General Assembly39s plenary power 2 TABOR 4 a 3 TABOR 2 b de nes quotdistrictquot as quotthe state or any local government excluding enterprisesquot 4 For purposes of this memorandum it is assumed that any tax action being analyzed has already been determined not to be quota new tax tax rate increase mill levy above that for the prior year valuation for assessment ratio increase for a property class or extension of an expiring taxquot and thus does not otherwise require prior voter approval pursuant to TABOR 4 a TELEPHONE 3038662045 FACSIMILE 3038664157 E MAIL ollsgastatecous approval pursuant to this catch all phrase5 STEP 1 Determine if any statute is being changed in a manner that modi es or affects tax policy Is a statute relating to the imposition of a tax6 being created repealed or amended in a manner that results in a modi cation of the standards or rules goveming the imposition of the tax7 If the answer to this question is quotNOquot prior voter approval is not required pursuant to TABOR If the answer is quotYESquot the analysis should proceed to Step 2 STEP 2 Determine whether the tax policy change directly causes a net tax revenue gain to the state or a local government8 A Does the tax policy change result in increased tax revenue for the state or a local government B Is any increase in tax revenue for the state or a local government greater than any decrease in tax revenue for each of the respective governments caused by the tax policy change C Would the net increase in tax revenue not have been collected 5 For an earlier version ofthis test which did not account for the steps required pursuant to Mesa County Bd of Comm rs v State 203 P3d 519 Colo 2009 see the January 15 1996 memorandum ofthe Office ofLegislative Legal Services entitled quotTest to be applied in determining what is a tax policy change directly causing a net tax revenue gain to any district under article X section 20 4 a ofthe Colorado Constitutionquot 6 The test applied in this memorandum assumes that a change is made to a tax as opposed to a charge that constitutes a fee special assessment or fine all ofwhich are not subject to the prior voter approval requirement of TABOR 4 a For more information about what is a tax see the January 61993 memorandum ofthe Of ce ofLegislative Legal Services entitled quotTestto be applied in determining what is a tax under Amendment 1quot 7 Such a modification includes a change in what the tax is imposed on when the tax is imposed or how tax liability is determined The following are examples ofwhat this office considers to be a tax policy change Creation modification or elimination of a tax credit creation modification or elimination ofa tax exemption or a modification to Colorado taxable income 8 The analysis related to this and other questions about revenue setforth in this memorandum isbased on the best information available to the General Assembly at the time that it enacts legislation which information is generally in the fiscal note prepared by Legislative Council Staff and usually includes the fiscal impact over the next two state fiscal years 2 without the tax policy change9 If the answer to any of these questions is quotNOquot prior voter approval is not required pursuant to TABOR If the answer to all of these questions is quotYESquot the analysis should proceed to Step 3 STEP 3 Determine whether the net tax revenue gain is a de minimis amount Is the net tax revenue gain more than the cost to the state or local government as applicable to conduct an election to obtain voter approval If the answer to this question is quotNOquot prior voter approval is not required pursuant to TABOR If the answer is quotYESquot the analysis should proceed to Step 4 STEP 4 Determine whether the net tax revenue gain exceeds a spending limitation in TABOR 710 Is the sum of total revenues of the state or local governments as applicable and the net tax revenue gain resulting from the tax policy change greater than 1 The limitation on state scal year spending if a state tax policy change 2 The limitation on a local government s scal year spending if a local government tax policy change 9 It is assumed that all other factors affecting tax revenues remain constant such as the number oftaxpayers and the number oftaxable occurrences unless there is reliable information to the contrar 10 See Section 20 The Taxpayer s BillofRights 7 Spending limits a The maximum annual percentage change in state fiscal year spending equals inflation plus the percentage change in state population in the prior calendar year adjusted for revenue changes approved by voters after 1991 Population shall be determined by annual federal census estimates and such number shall be adjusted every decade to match the federal census b The maximum annual percentage change in each local district39s fiscal year spending equals in ation in the prior calendar year plus annual local growth adjusted for revenue changes approved by voters after 1991 and 8 b and 9 reductions c The maximum annual percentage change in each district39s property tax revenue equals in ation in the prior calendar year plus annual local growth adjusted for property tax revenue changes approved by voters after 1991 and 8 b and 9 reductions 3 3 The limitation on a local government s property taX revenue if a local government property tax policy change If the answer to the applicable question or questions is quotNOquot prior voter approval is not required pursuant to TABOR If the answer to any question is quotYESquot prior voter approval is required pursuant to TABOR If it is a state tax policy change voter approval would need to be sought at a statewide election If it is a local government tax policy change voter approval would need to be sought by each local government for which the quotNOquot answer applies WOOQONMAUJNH House Joumal 17th DayJanuary 29 2010 Page 117 REVENUE ATTRIBUTABLE TO THE ENACTMENT OF HOUSE BILL 101190 ENACTED IN 2010 AND SHALL TO THE EXTENT SUCH INFORMATION IS AVAILABLE MAKE QUARTERLY REPORTS TO THE GENERAL ASSEMBLY REGARDING THE QUARTERLY AND CUMULATIVE NET REVENUE GAIN TO THE STATE RESULTING FROM THE ENACTMENT OF SAID BILL quot Renumber succeeding section accordingly HB101191 be amended as follows and as so amended be referred to the ommittee of the Whole With favorable recommendation Amend printed bill page 4 line 6 after quotTHERETOquot add quotIF THE LOCAL GOVERNMENT OR POLITICAL SUBDIVISION EXPRESSLY SUBJECTS SUCH SALES OR STORAGE USE OR CONSUMPTION TO ITS SALES ORUSE TAX THE EFFECTIVE DATE SHALL BE EITHER JANUARY 1 OR JULY 1 AND THE LOCAL GOVERNMENT OR POLITICAL SUBDIVISION SHALL PROVIDE NOTICE TO THE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF REVENUE AT LEAST FORTYFIVE DAYS PRIOR TO THE EFFECTIVE DATE OF THE SALES OR USE TAXquot Page 6 line 5 after quotTHERETOquot add quotIF THE LOCAL GOVERNMENT OR POLITICAL SUBDIVISION EXPRESSLY SUBJECTS SUCH SALES OR STORAGE USE OR CONSUMPTION TO ITS SALES OR USE TAX THE EFFECTIVE DATE SHALL BE EITHER JANUARY 1 OR JULY 1 AND THE LOCAL GOVERNMENT OR POLITICAL SUBDIVISION SHALL PROVIDE NOTICE TO THE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF REVENUE AT LEAST FORTYFIVE DAYS PRIOR TO THE EFFECTIVE DATE OF THE SALES OR USE TAX quot Page 6 after line 5 insert quotSECTION 3 Part 1 of article 21 of title 39 Colorado Revised Statutes is amended BY THE ADDITION OF A NEW SECTION to read 3921122 Revenue impact of 2010 tax legislation tracking by department THE DEPARTMENT OF REVENUE SHALL ACCOUNT FOR ALL REVENUE ATTRIBUTABLE TO THE ENACTMENT OF HOUSE BILL 101191 ENACTED IN 2010 AND SHALL TO THE EXTENT SUCH INFORMATION IS AVAILABLE MAKE QUARTERLY REPORTS TO THE GENERAL ASSEMBLY REGARDING THE QUARTERLYAND CUMULATIVE NET REVENUE GAIN TO THE STATE RESULTING FROM THE ENACTMENT OF SAID BILL quot Renumber succeeding section accordingly HB101192 be amended as follows and as so amended be referred to the ommittee of the Whole With favorable recommendation Amend printed bill page 4 after line 6 insert quotSECTION 3 Part 1 of article 21 of title 39 Colorado Revised WOOQONMAUJNH Page 148 House Joumal20th DayFebruary l 2010 HB101191 by Representatives Pommer also Senators Heath Concerning the narrowing of the existing exemption from the state sales and use taxes for food and in connection therewith subjecting candy and soft drinks to the state sales and use taxes and making an appropriation therefor The uestion being quotShall the bill passquot A rolci call vote was taken As shown by the following recorded vote a majority of those elected to the House voted in the affirmative and the bill was declared passed YES 36 NO 29 EXCUSED 0 ABSENT 0 Acree N Gerou N McFadyen Y Ryden Y Apuan N Hullinghorst Y McKinley N Scanlan Y Balmer N Judd Y McNulty N Schafer S Y Baumgardner N Kagan Y Merrifield Y Solano Y Bene eld Y Kefalas Y Middleton Y Sonnenberg N Bradford N Kerr A Y Miklosi Y oper Y Casso Y Kerr J N Murray N Stephens N Court Y King S N Nikkel N Summers N Curry Y Labuda Y Pace Y Swalm N DelGrosso N Lambert N Peniston Y Tipton N Ferrandino Y Levy Y Pommer Y Todd Y Fischer Y Liston N Primavera Y Tyler Y Frangas Y Looper N Priola N Vaad N Gagliardi Y Massey N Rice Y Vigil Y Gardner B N May N Riesberg Y Waller N Gardner C N McCann Y Roberts N Weissmann Y Y Speaker Cosponsors added Representatives Bene eld Frangas Hullinghorst J dd Kagan Labuda Levy Merrifield Middleton Schafer S Todd Tyler 5 HB101192 by Representatives Pommer also Senators Heath Concerning the state sales and use taX of standardized software and making an appropriation therefor The uestion being quotShall the bill passquot A rolci call vote was taken As shown by the following recorded vote a majority of those elected to the House voted in the affirmative and the bill was declared passed YES 35 NO 30 EXCUSED 0 ABSENT 0 Acree N Gerou N McFadyen Y Ryden Y Apuan Y Hullinghorst Y McKinley N Scanlan Y Balmer N Judd Y McNulty N Schafer S Y Baumgardner N Kagan Y Merrifield Y Solano Y Bene eld Y Kefalas Y Middleton Y Sonnenberg N Bradford N Kerr A Y Miklosi Y oper Y Casso Y Kerr J N Murray N Stephens N Court Y King S N Nikkel N Summers N Curry N Labuda Y Pace Y Swalm N DelGrosso N Lambert N Peniston Y Tipton N Ferrandino Y Levy Y Pommer Y Todd Y Fischer Y Liston N Primavera Y Tyler Y Frangas Y Looper N Priola N Vaad N Senate Joumal27th DayFebruary 8 2010 Amend reengrossed bill page 3 after line 27 insert quotSECTION 3 Part 1 ofarticle 26 oftitle 39 Colorado Revised Statutes is amended BY THE ADDITION OF A NEW SECTION to read 39261023 Inclusion of direct mail advertising materials in state sales tax base use revenues generated for education NOTWITHSTANDING ANY OTHER PROVISION OF LAw THE GENERAL ASSEMBLY SHALL APPROPRIATE AT LEAST FORTY PERCENT OF THE AMOUNT OF ANY INCREASE IN NET STATE SALES TAX REVENUES RESULTING FROM THE AMENDMENT OF THE DEFINITION OF TANGIBLE PERSONAL PROPERTY SET FORTH IN SECTION 3926102 15 BY HOUSE BILL 101 189 ENACTED IN 2010 TO INCLUDE DIRECT MAIL ADVERTISING MATERIALS FOR THE PURPOSE OF FUNDING PRESCHOOL THROUGH TWELFTH GRADE PUBLIC EDUCATION SUCH FUNDING SHALL SUPPLEMENT AND NOT SUPPLANT ANY OTHER MONEYS USED FOR SAID PURPOSE quot Renumber succeeding sections accordingly Page 187 Less than a majority of all members elected to the Senate having voted in the affirmative the amendment to the report of the Committee of the Whole was lost on the following roll call vote YES 15 NO 20 EXCUSED 0 ABSENT 0 Bacon N Hodge N Morse N Spence Y Boyd N Hudak N Newell N Steadman N Bro hy Y Johnston N Pen Y Tapia N Ca man Y Keller N Renlfgtrloe Y Tochtrop N Carroll M N Kester Y Romer N White Y Foster N King K Y Sandoval N Whitehead N Gibbs N Kopp Y Scheffel Y Williams N Harvey Y Lundberg Y Schultheis Y President N Heath N Mitchell Y Schwartz Y by Representatives Pommer also Senators HeathConceming the suspension of the exemptlon from the state sales and use taxes for fuels used for 1ndustr1al purposes and making an appropriation therefor Senator Penry moved to amend the Report of the Committee of the Whole to show that the following White floor amendment L069 to HB 101190 did not pass Amend reengrossed bill page 3 strike lines 25 through 27 Page 4 strike lines 1 through 10 Renumber succeeding sections accordingly Less than a majority of all members elected to the Senate having voted in the affirmative the amendment to the report of the Committee of the Whole was lost on the following roll call vote YES 13 NO 21 EXLU SED 0 ABSENT 0 Bacon N Hodge N Morse N Spence Y Boyd N Hudak N Newell N Steadman N Bro hy Y Johnston N Pen Y Tapia N Ca man Y Keller N Renlfgtrloe Y Tochtrop N Carroll M N Kester Y Romer N White N Foster N King K Y Sandoval N Whitehead N Gibbs N Kopp Scheffel Y Williams N Harvey Y Lundberg Y Schultheis Y President N Heath N Mitchell Y Schwartz Y Abstaining from voting under Senate Rule 17c Senator Kopp HB101191 by Representatives Pommer also Senators HeathConceming the narrowing of the eXisting exemption from the state sales and use taxes for food and in connection therewith OOOQOMbUJNt a Page 188 Senate Joumal27th DayFebruary 8 2010 subj ectingcandy and soft drinks to the state sales and use taxes and making an appropr1atlon therefor Senator Penry moved to amend the Report of the Committee of the Whole to show that the following amendment to HB 101191 did pass Amend reengrossed bill page 7 after line 27 insert quotSECTION 5 Part 1 of article 26 oftitle 39 Colorado Revised Statutes is amended BY THE ADDITION OF A NEW SECTION to read 39261023 Inclusion of candy and soft drinks in state sales tax base use revenues generated for education NOTWITHSTANDING ANY OTHER PROVISION OF LAw THE GENERAL ASSEMBLY SHALL APPROPRIATE AT LEAST FORTY PERCENT OF THE AMOUNT OF ANY INCREASE IN NET STATE SALES TAX REVENUES RESULTING FROM THE ADDITION OF THE DEFINITIONS OF quotCANDYquot AND quotSOFT DRINKS SET FORTH IN SECTION 3926707 BY HOUSE BILL 101 19 1 ENACTED IN 2010 TO INCLUDE CANDY AND SOFT DRINKS FOR THE PURPOSE OF FUNDING PRESCHOOL THROUGH TWELFTH GRADE PUBLIC EDUCATION SUCH FUNDING SHALL SUPPLEMENT AND NOT SUPPLANT ANY OTHER MONEYS USED FOR SAID PURPOSE quot Renumber succeeding sections accordingly Less than a majority of all members elected to the Senate having voted in the affirmative the amendment to the report of the Committee of the Whole was lost on the following roll call vote YES 15 NO 20 EXCUSED 0 AB SENT 0 Bacon N Hodge N Morse N Spence Y Boyd N Hudak N Newell N Steadman N Bro hy Y Johnston N Pen Y Tapia N Ca man Y Keller N Ren roe Y Tochtrop N Carroll M N Kester Y Romer N White Y Foster N King K Y Sandoval N Whitehead N Gibbs N Kopp Y Scheffel Y Williams N Harvey Y Lundberg Y Schultheis Y President N Heath N Mitchell Y Schwartz Y Senator King moved to amend the Report of the Committee of the Whole to show that the following Steadman oor amendment L036 to HB 101191 did not pass Amend the Finance Committee Report dated February 3 2010 page 1 strike lines 6 and 7 and substitute quotTHIS SUBSECTION1 ON AND AFTER MAY 1 2010 SALES OF CANDY AND SOFT DRINKS SHALL BEquot Page 2 line 2 strike quotFOR THE PERIOD COMMENCINGquot and substitute quotON AND AFTER Page 2 strike line 3 and substitute quot2010quotquot Page 2 strike lines 10 through 12 Page 2 strike lines 14 and 15 Less than a majority of all members elected to the Senate having voted in the affirmative the amendment to the report of the Committee of the Whole was lost on the following roll call vote YES 17 NO 18 EXCUSED 0 ABSENT 0 Bacon N Hodge N Morse N Spence Y Boyd N Hudak N Newell N Steadman N Bro hy Y Johnston N Pen Y Tapia N Ca man Y Keller N Ren roe Y Tochtrop N Carroll M N Kester Y Romer N White Y Foster N King K Y Sandoval Y Whitehead Y Gibbs N Kopp Y Scheffel Y Williams N Harvey Y Lundberg Y Schultheis Y President N Heath N Mitchell Y Schwartz Y OOOQOMbUJNt a HB101192 Senate Joumal27th DayFebruary 8 2010 Page 189 Senator Penry moved to amend the Report of the Committee of the Whole to show that the following Penry oor amendment L039 to HB 101191 did pass Amend reengrossed bill page 4 after line 25 insert quot4 NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH e OF SUBSECTION 1 AND PARAGRAPH d OF SUBSECTION 2 OF THIS SECTION THE SALE OR STORAGE USE OR CONSUMPTION OF CANDY AND SOFT DRINKS AS DEFINED IN SAID PARAGRAPHS e AND d BY ANY BUSINESS THAT HAS TOTAL ANNUAL GROSS SALES AT ALL BUSINESS LOCATIONS IN THE STATE OF Two HUNDRED FIFTY THOUSAND DOLLARS OR LESS SHALL CONTINUE TO BE EXEMPT FROM STATE SALES AND USE TAXATION FOR THE PERIOD COMMENCING MAY 1 2010 AND ENDING JUNE 302013quot Page 6 after line 16 insert quot6 NOTWITHSTANDING THE PROVISIONS OF SUBSECTIONS 2 AND 3 OF THIS SECTION THE SALE OR STORAGE USE OR CONSUMPTION OF CANDYAND SOFT DRINKS PURCHASED BY OR THROUGH VENDING MACHINES BY ANY BUSINESS THAT HAS TOTAL ANNUAL GROSS SALES AT ALL BUSINESS LOCATIONS IN THE STATE OF Two HUNDRED FIFTY THOUSAND DOLLARS OR LESS SHALL CONTINUE TO BE EXEMPT FROM STATE SALES AND USE TAXATION FOR THE PERIOD COMMENCING MAY 1 2010 AND ENDING JUNE 30 2013quot Renumber succeeding subsection accordingly Less than a maj ority of all members elected to the Senate having voted in the affirmative the amendment to t e report of the Committee of the Whole was lost on the following roll call vote YES 17 NO 18 EXCUSED 0 ABSENT 0 Bacon N Hodge N Morse N Spence Y Boyd N Hudak N Newell N Steadman N Brophy Y Johnston N Penry Y Tapia N Cadman Y Keller N Renfroe Y Tochtrop N Carroll M N Kester Y Romer N White Y Foster N King K Y Sandoval Y Whitehead Y Gibbs N Kopp Y Scheffel Y Williams N Harvey Y Lundberg Y Schultheis Y President N Heath N Mitchell Y Schwartz Y by Representatives Pommer also Senators HeathConceming the state sales and use tax 0 standardized software and making an appropriation therefor Senator Penry moved to amend the Report of the Committee of the Whole to show that the following Penry floor amendment L034 to HB 101192 did not pass Amend reengrossed bill page 5 line 5 strike quotAND NOTquot and substitute quotORquot Less than a maj ority of all members elected to the Senate having voted in the affirmative the amendment to t e report of the Committee of the Whole was lost on the following roll call vote YES 14 NO 21 EXLU SED 0 ABSENT 0 Bacon N Hodge N Morse N Spence Y Boyd N Hudak N Newell N Steadman N Brophy Y Johnston N Penry Y Tapia N Cadman Y Keller N Renfroe Y Tochtrop N Carroll M N Kester Y Romer N White N Foster N King K Y Sandoval N Whitehead N Gibbs N Kopp Y Scheffel Y Williams N Harvey Y Lundberg Y Schultheis Y President N Heath N Mitchell Y Schwartz Y Senator King moved to amend the Report of the Committee of the Whole to show that the following King floor amendment L042 to HB 101192 did pass OOOQOMbUJNt a Senate Joumal29th DayFebruary 10 2010 Page 203 SENATE JOURNAL Sixtyseventh General Assembly STATE OF COLORADO Second Regular Session 29th Legislative Day Wednesday February 10 2010 Prayer By the chaplain Reverend Dr Louise B Barger Retired Executive Minister American Baptist Churches of the Rocky Mountains Call to By the President at 900 am Order Pledge By Senator Schultheis Roll Call Present33 Excused2 Renfroe Scheffel Present later2 Renfroe Scheffel Quorum The President announced a quorum present Reading of On motion of Senator Johnston reading of the Journal of Tuesday February 9 2010 was Journal dispensed with and the Journal was approved as corrected by the Secretary COMMITTEE OF REFERENCE REPORTS Legal After consideration on the merits the Committee recommends that SB10060 be referred Services to the Committee of the Whole with favorable recommendation and with a recommendation that it be placed on the Consent Calendar Finance The Committee on Finance has had under consideration and has had a hearin on the following appointments and recommends that the appointments be confirme MEMBERS OF THE SECURITIES BOARD for a term eXpiring July 1 2012 Steven W Palamar of Telluride Colorado a member of the public at large reappointed Finance After consideration on the merits the Committee recommends that HB101055 be referred to the Committee of the Whole with favorable recommendatlon THIRD READING OF BILLS FINAL PASSAGE On third reading the titles of the following bills were publicly read the reading at length having been dispensed with by unanimous consent HB101189 by Representatives Pommer also Senators HeathConceming the elimination of the state sales and use taX exemption for direct mail advertising materials and making an appropriation therefor The question being quotShall the bill passquot the roll call was taken with the following result OOOQOMbUJNt a Page 204 Senate Joumal29th DayFebruary 10 2010 YES 19 NO 15 EXCUSED 1 ABSENT 0 Bacon Y Hodge Y Morse Y Spence N Boyd Y Hudak Y Newell Y Steadman Y Brophy N Johnston Y Penry N Tapia Y Cadman N Keller Y Renfroe E Tochtrop Y Carroll M Y Kester N Romer Y White N Foster Y King K N Sandoval Y Whitehead N Gibbs Y Kopp N Scheffel N Williams Y Harvey N Lundberg N Schultheis N President Y Heath Y Mitchell N Schwartz N A majority of all members elected to the Senate having voted in the affirmative the bill was passed HB101191 byRepresentatives Pommer also Senators HeathConceming the narrowing of the eX1st1ng exemptlon from the state sales and use taxes for food and 1n connectlon therew1th subjecting candy and soft drinks to the state sales and use taxes and making an appropriation therefor A majority of those elected to the Senate having voted in the affirmative Senator Heath was given permission to offer a third reading amendment Third Reading A J No 1 L041 by Senator Heath Amend revised bill page 2 line 2 strike quot3926707 1quot and substitute 707quot quot3926 Page 2 line 3 strike quotPARAGRAPHquot and substitute quotSUBSECTIONquot Page 2 line 4 strike quot1 Thequot Page 2 strike lines 5 and 6 Page 2 line 7 strike quotf 1quot and substitute quot15 aquot Page 2 line 8 strike quotTHIS SUBSECTION1quot and substitute quotSUBSECTION 1 OF THIS SECTIONquot Page 2 line 10 strike quot11quot and substitute quotbquot and strike quotPARAGRAPH iquot and substitute quotSUESECTTON15quot Page 2 line 11 strike quotAquot and substitute quot1quot Page 2 line 17 strike quotBquot and substitute quotIIquot Page 4 line 8 strike quotfquot and substitute quotbquot and strike quot1quot and substitute quot15quot The amendment was passed on the following roll call vote YES 34 NO 0 EXLUSED 1 ABSENT 0 Bacon Y Hodge Y Morse Y Spence Y Boyd Y Hudak Y Newell Y Steadman Y Bro hy Y Johnston Y Pen Y Tapia Y Ca man Y Keller Y Renfrloe E Tochtrop Y Carroll M Y Kester Y Romer Y White Y Foster Y King K Y Sandoval Y Whitehead Y Gibbs Y Kopp Y Scheffel Y Williams Y Harvey Y Lundberg Y Schultheis Y President Y Heath Y Mitchell Y Schwartz Y A majority of those elected to the Senate having voted in the affirmative Senator Mitchell was g1ven permission to offer a third reading amendment Third Reading A J No 2 L040 bv Senator Mitchell Amend revised bill page 6 line 8 strike quotSHALL TO THE EXTENT SUCH INFORMATION Tsquot Page 6 line 9 strike quotAVAILABLEquot and substitute quotSHALLquot b H H H H H H H I IOUIwat IOOOOQOUIbWNt a 18 HB101194 Senate Joumal29th DayFebruary 10 2010 Page 205 The amendment was lost on the following roll call vote YES 16 NO 19 EXLUSED 0 ABSENT 0 Bacon N Hodge N Morse N Spence Y Boyd N Hudak N Newell N Steadman N Bro hy Y Johnston N Pen Y Tapia N Ca man Y Keller N Renfroe Y Tochtrop N Carroll M N Kester Y Romer N White Y Foster N King K Y Sandoval N Whitehead Y Gibbs N Kopp Y Scheffel Y Williams N Harvey Y Lundberg Y Schultheis Y President N Heath N Mitchell Y Schwartz Y The question being quotShall the bill as amended passquot the roll call was taken with the following result YES 18 NO 17 EXCUSED 0 AB SENT 0 Bacon Y Hodge Y Morse Y Spence N Boyd Y Hudak Y Newell Y Steadman Y Bro hy N Johnston Y Pen N Tapia Y Ca man N Keller Y Renfroe N Tochtrop Y Carroll M Y Kester N Romer Y White N Foster Y King K N Sandoval N Whitehead N Gibbs Y Kopp N Scheffel N Williams Y Harvey N Lundberg N Schultheis N President Y Heath Y Mitchell N Schwartz N A majority of all members elected to the Senate having voted in the affirmative the bill was passed byRepresentatives Ferrandino also Senators HeathConceming the narrowingof the eX1st1ng exemptlons from the state sales and use taxes for art1cles sold to sellers 0 1tems intended for human consumption that are furnished by the sellers to their customers with such items without the addition of a separate charge and making an appropriation therefor The question being quotShall the bill passquot the roll call was taken with the following result YES 18 NO 17 EXLUSED 0 ABSENT 0 Bacon Y Hodge Y Morse Y Spence N Boyd Y Hudak Y Newell Y Steadman Y Brophy N Johnston Y Penry N Tapia Y Cadman N Keller Y Renfroe N Tochtrop Y Carroll M Y Kester N Romer Y White N Foster Y King K N Sandoval N Whitehead N Gibbs Y Kopp N Scheffel N Williams Y Harvey N Lundberg N Schultheis N President Y Heath Y Mitchell N Schwartz N A majority of all members elected to the Senate having voted in the affirmative the bill was passed On motion of Senator Morse and with a majority of those elected to the Senate having voted 1n the aff1rmat1ve the Senate proceeded out of order for 1ntroductlon and cons1deratlon of resolutlons MESSAGE FROM THE HOUSE February 10 2010 The House has adopted and transmits herewith HJR101011 as printed in House Journal February 10 DOOOUIJgtUJNgt a xvsunsaswnm Immmmuumummmmu mm a r m mnv momma 2mm 0 r 5mm quotLu smut mama v mam smug mamm rs M m Mmeso mm nuLNIL mimt nun51m 9mm nuns mgrnew ummu mmms mmm 555mm mmmr macnrcur 149910 mamrm uuvcwm mama mm n mamac mnmrro mum mm Wm WW WW5 a W m WOLVN EIS 0 10102 er Fund sa z tax an states dwaer Hunks 10F 51on mmumms m1 Food sales tax on states39 chopping blocks By Daniel M mu sehets Sh wr er 7w hhhrthtmmm 39 worth of foodstuffs a year WM 35 311 Biting into grocery bills year39 sever o e Shawn39s n I5 are nay slaw les Iaxes an nmtenes ahhwah swan Dflhvse MNP states that still tax ma e a lower rate on lam man an omer pnchls quot11an r Siam mmwus WWW are E mm mmde wwan Weee teem we the that tea he states We he a an M 5 55 d Tenn cons es see are denng scrapping thexr eut at the eash taxes last year Arkansas Gov Mxke ah awau G v Lmda ngle a Repubheau both want to dump the sa1es tax Slatesw houl on food No one sates tax on should be taxed for Emcenes b ymg b 51 ed heeessnaesquot ngle 15ngsz sad h a state eht when she uhveued a 3322223115 5 eomphehehswetax mm s V ackage Jan 18 Ma ng1e and Beebe both bank on budget gt surpluses to ful the mm at My Mum Sewmew tat no t 39s 4 percent sales tax on food In hxs State of the State address Beebe ealledxt a mora1 chargequot Most states Wouldxather not tax groeenes sad Nxek Johnson duector of the State Fxseal R A t ADV v N ff tth n r quothe i mueheheededrevehue W uttw Vuer mu HWWW statehne aghvEDV rvtab Estav cmtm d1749552272EI1D 7 13 us PM Food sales tax on states39 chopping blocks grocery stores and restaurants Idaho GOV CL Butch Otter R said that he would like to do away with the state s 5 percent sales tax on groceries but that the state simply can t afford the 180 million revenue gap the repeal would cost Instead the governor in his State of the State address proposed to let low income Idahoans deduct 90 7 up from 20 now 7 from their state income taxes Besides Idaho the states of Hawaii Kansas Oklahoma and South Dakota also offer such credits or rebates Sales taxes on groceries are regressive meaning they take a larger percentage of the income of poor people than of wealthier people A cut in the grocery sales tax is a way to give direct assistance to the poor said Suj it CanagaRetna a budget expert for the Council of State Governments A 1 billion budget surplus allowed Wyoming last year to temporarily repeal its 4 percent sales tax on food for the next two years and lawmakers there are considering making the repeal permanent Utah and South Carolina last year joined ve other states that tax groceries at lower rates than other goods both cutting their sales tax for food by 2 percent We saw a minitrend on this last year said Bert Weisan a fiscal expert for the National Conference of State Legislatures A more controversial proposal is brewing anew in Mississippi and Tennessee where some lawmakers last year failed to convince their governors to lower the sales tax on groceries in exchange for hiking the tax on cigarettes Mississippi and Tennessee have the country s highest sales taxes on food at 7 percent and 6 percent respectively and among the lowest taxes on cigarettes just 18 cents and 20 cents a pack In Mississippi a new push for a food taxcigarette tax swap could provide election fodder for statehouse and gubernatorial races this year In Tennessee an alternate swap is being proposed taxing pornography instead of food Mississippi Gov Haley Barbour R atly rejected any tax increase last year It is irresponsible to cut Mississippi s budget revenue while we re trying to recover from Hurricane Katrina Barbour said last January when he vetoed the bill A proposal is in the works this year from Mississippi Lt Gov Amy Tuck R who led the push in 2006 Tuck has said she does not plan to run for any statewide of ce this year The 20 senators who voted against the grocery sales tax cut will be hearing this on the stump from opponents David Hampton editorial director of The Clarion Ledger predicted last year In Tennessee Gov Phil Bredesen D plans to propose increasing the state s 20centsapack cigarette tax But he recently told The Associated Press that the move would not be linked with a decrease in the state s 6 percent sales tax on groceries Bredesen said that he s quotnot ideologically opposedquot to reducing the food tax but that he has other spending priorities especially in education and health care the AP reported earlier this month The solution proposed by Tennessee state Rep Stacey Camp eld R is to get rid of the sales tax on food and replace the estimated 450 million a year in revenues with a tax on pornography Bredesen called the proposal constitutionally suspect but he said he d be happy to discuss it Comment on this story in the sQace below by registering with Statelineorg or e mail your feedback to our Z etters m the edimr section at tetters smtetine org httpwwwstatelineorgiveprintabIestorycontent1d1749562272010 71308 PM Dans smnned bv Ex mtufn s cmaradd statesman February 9 2010 Vol m No a rm Mgmbg r smsmncuow Hume z mun w n curWWnnun m Wm mum may Dems stunned by extent of cuts r 7 Due BylasnnKnse a cot 5mm Tne budget new 5 dnw amnd tn det Wurse am thter budget bnennd he d attne Gwemur39 Manser tdrtcn Guest Ca umn m r surdrcav e 1 rcmulu m D task ct mmmmg an addmuna sand rmHmn 1m We 1 dc Have a reduest m wrtn tne Repubhcans tc see rt tne caucus wants tc WWW rneet but we Wm be rneetrn wrtn lav Fax s Dmmg Gmde Demccratrc and Repubhcan eadersnrp as Dmmthx a part crtnrs thter sard Thase Were the Days wnat x reaHv Want uedmetd understand n cur rs at dnere rs ndt an abmtv a part j cm dB what we need tn dB n tn sunscnue Onhns m war MM ccnsrdennd verv sermuscuts e WWW NG cdnunued The cuts tnat we make tnrs Pnn ndvsman veer etnat are necessarv tnrs veer e Pam car Carmemans nu a sn be necessarv tc carrv mtu sca vear 39mun mou39r tn thter asked 5 state ccnta s Wm 3 RW uercertrrctn tnerr uperatrnd bud ets tc Gme m he Dm t Qa etheshnr aH 0n Tuesdav n s Wnud a na stcr 9 a 339 c gt 5 3 Gav thter 2H5 Demncratu awmakers tnat tne r m warned awmakersthat ndt aH departments Wm budget 9 5 5 5 WWSEHW be cut EquaHv mm by Jasan KasenaThe Ca arada statesman We asked fay 39 suruma quot thter sard addmu tne cuts Wm nut be Dam ess w tn r defend tne case thhe state and cr wnat we rnust dd thter cdnunued WE39VE ddnd tn be m n rrr u w r mn r mTuesdav r n n ltr 5255er r tne budget cuts are ddnd tn dd dEED In dne 2mg budgetwe used a mt cr casn Dansfers r and we used tne reserve Tndse are dune sard Jac Chev Sen MD KEHEr DcWhe t R due Dans smnnad bv Extmtuftufs tgbradg statesman We dun39t have anvmgre accuum u j 1 mechamsms We dgn39t have anvrngre bansters we can use tb butterquot sne 5 W e t c n M E hstens ta gures w termsgfthe gg 1g bud et New e Speaker Terrance carr HDuS 39 39 g va am Rttter tatk abbut tne budget at tne and the guru budget tnat 5 Wm tnts Gavemur s Mansmn an Tuesdav Senate 5 sg sgbenng We have tg ggk at Whme fre wden t granan Shaffer stts m tne raw next WWW WE Mam rank bundms D aer nm by 1am Kasenarne cum statesman gfmm mka m m W W gutstde ct Educatmnr DHSDHS and Medteatd tnat tne cuts W be nard tg take tints 5g dne usua budget brgeesstnat we gg tnrgugn 7 Were we 5 st dawn and sav WEH 1 Wm take a 1ggggg guttnts gr 1 Wm take sagggg fmm nere39 rthdt 5 Game KEHEr Sald WE Wav rn n n 39 gmng m be dgmg But we dgn39t have anvwnere 2 52 m gg mu n Den n uun m ar a uun are gmng tg belust as tgugb Ferrandmu satd Remember that EvErvtth S gntne tame t u tn re are ng sacred cgws We are eutgrrg mm bgne marrgw rrn Exem tmnsthat keep 52 1 thDn frum gmng mm dne state39s setters tg see Wthev are acmaHv dmng wnattnev are suDDDSEd m be dgmg7 asked RED Jgnn saber DnThgmtgn after rewewmg nurnbers sngwmg ngw rnuen rnust be catfrum tne next Vear39s budget Isthera anv Wav tnat we can rewew mat sg unattne narrn sfe t bv eve mm and nntlustthe Wgrkmg dass ct Cgmradm Rttter satd tnat a thguuh nts eme S rewewmg aH dne state39s tax eredns a bu k ct tne sa es tax attract and retatn busmess r dne rnasswe budget shgrtfaH Wgn t be rnuen srnauer r Jastvn cgmradgstatesman cum Ritter proposes 131 8M in c httpdenverbizjomnalscom Page 1 of 2 We Lag nx um mugs Mg umr a anquot saws nuwu nuns Jnuml e Mama 5 2m Busm s JOURNAL vaay November 5 my Ritter proposes 131 8M in cuts to budget wenvev Eusmess Juuma e by Ed Sea uvev Gov B111 RJtter nmn er Mm n H July mllhonnextyear An Anytm r thestate R1tter saxd c H m 1m hn r 11 percent affect conservaton easements and 3 percent hxt me agnculture mdustry th mr meter balance the budget he sad I ernrtauon on gross oonservauon easement credns Suspensron ofthe exempnon for drreot rnarl advernsrng Ehrnrnanon ofthe exempnon for nonessenhal food oontarners Suspensron ofthe exempnon for agncuhural oornpounds and bull semen Suspensron ofthe exempnon for pesncrdes ernrtanon otoorporate enterpnse zone mvestment tax eredrts to 250000 Rensron otahemanve fuel tax eredrts Ehrnrnanon ofthe ahernanve rnrnrrnurn taxand taxcredxts Ehrnrnanon ofthe software exempnon cuts he saxd Ritter proposes 1318M in c httpdenverbizjournalscom Page 2 of2 Conversely public colleges and universities will decide how to absorb 56 million in higher education cuts Ritter said But much ofthe decreased funding will be offset by allowance of 9 percent increases in tuition to instate students and unlimited tuition increases to outof state students he said The reduction in tourism marketing funding will save the state about 10 million and the Medicaid reimbursement rate reduction million said Todd Saliman director ofthe Office of State Planning and Budgeting State employees will not get raises and will be required to contribute 25 percent more to retirement accounts essentially a pay cut and the state once again will save 90 million by suspending property tax breaks for senior citizens quotIn the past year families and businesses across Colorado have been tightening their beltsquot Ritter said quotWe have to live within our budgetquot Once again reaction was mixed to Ritter39s budgetbalancing proposals Sen Moe Keller a Wheat Ridge Democrat and Joint Budget Committee chairwoman lauded him for quotmaking government more efficient and ending tax loopholes that don39t stimulate the economy orprotect consumers families or small businessesquot Several childrenls advocacy groups also thanked him for not cutting funding to programs like fullday kindergarten or the Children39s Basic Health Plan quotGovernor Ritter is fulfilling his commitment to investing in Colorado39s kids and creating a stronger future for our statequot said a statement released by the Colorado Children39s Campaign quotTo be sure the cuts to K 12 education funding will be painful for kids but we understand that there must be shared sacrifices and we appreciate his careful approach to these reductionsquot But Senate Minority Leader Josh Penry a Grand Junction Republican and 2010 gubernatorial candidate criticized Ritter for his proposed suspensions of businessrelated tax exemptions calling them quotbad policyquot n L Rma39s new budget targets Lax eedts cdaada Statesman February 9 2010 mm Vol m No a r Immiqu lmm tnrmurmn MlMummdeI MmmWHYMINI lrmth39dmer Rittefs new budget targets tax credlts innmus BY LESIiE Immensequot M cameo 5mm Gav beams DnJuW 1n Tne new budget Wuu d caver a Drnlected 51 U2 human revenue snarttaH a e e a Ednama s WE quot quotE nurenases and rueweetndent cars Guest Ca umn I39m rcmuus manv Samoa 5 skvmckeunurquot satd Rttter 2am Demwrat Natmna Cunverman m v N of Jerry Kane davs rar sca veer 2mm wnten featured a surmus created bv a must m ventde redtstrattan fees under FASTER Tne pranased GENEra Fund budget went tn dne Genera Assernbwsmnt auddet Cumrmttee furfurma rewew an Mundav NW 9 xnnermew Jay Fax Dman Gums Dmmthx Thase Were the Days newneatmdde v u aDDmachtu tne dwffmu ttask er batandnd tne Genera Fund buddet ua cm39noN I u sutsente Onhns smaH busmessesquot sne satd anvutmma Pnn Advemsmq pan car Cannamm Dettmgtn Wurk antnts Drunnsa u 39 t was an taste mom m Km nrrrr r n arn a Cums 5 sutmrsstane a Edltana Taxtnd mgarettes and NEW candv saunds pnhtmaHv current 7 butthat S snma EHQWEEHHQquot euraennes r satd Lambert It39sthe unvemur demdmg wnats daad rar vuu tn eat And t s a tax ncrease a thnts Tne unvernur dtsadrees savmuthat sarne ar the Drunnsa s are enandesta Dnhmes and den nm ans I r r Tnts S aratr and ba anced budget satd Rttter wna added dnat tt rntnnntzes Dam prdteets m are and Ecnnnmm drawtn Rttter pranases budget sawan tnraudn tnese cuts rettrernentrunds mstead ar havmg tne state guvemment makethe Dnmbuunn Tne Emu nvees a n n davs e an WDrSE Dav cuts and warms ten nnen bene ts satd Cumradu WINS Exeeuuve Dtreetar Rabert ctbsan Our members have 2 e a Ritter39s new budget targeis tax credits Colorado Statesman we feel creative solutions at all aspects of the budget are neededquot 0 28 million in Medicaid expenditures 0 902 million by suspending the Senior Homestead Exemption for an additional year 0 56 million in higher education expenditures Universities and colleges would however be allowed to raise tuition by up to 9 percent Funding for higher education will drop from 706 million in FY 200910 budget to 650 million in FY 201011 That in part is due to federal stimulus monies falling from 377 million to 95 million during the same period Ritter suggested that students in need of financial aid would be able to tap into PELL grants 0 260 million from K12 education The 46 percent budget cut Ritter said could be achieved by reconfiguring the funding formula under Amendment 23 which was approved by voters in 2000 The amendment requires K12 education funding to be increased by inflation plus 1 percent each year for 10 years and thereafter be increased by at least inflation However Ritter39s budget will not slash funding for kindergarten and preschool programs Jane Urschel associate executive director of the Colorado Association of School Boards told news media that the change in funding for public schools might violate Amendment Urschel acknowledged however that it appears the governor had limited choices I think this is just the beginning of what cuts to K12 will look likequot said Urschel who did not anticipate launching a legal challenge In 2003 attorneys reviewed Amendment 23 and found that it did not consider all factors for school districts According to their memo the amendment factored statewide funding per pupil but excluded total program funding JBC member Rep Jack Pommer DBoulder said that legislators will have to weigh the proposed budget cut against law 0 1318 million derived by suspending or eliminating tax credits and exemptions Of that savings an estimated 179 million would be derived by taking the state sales tax exemption from candy and soda pop The tax exemption enacted in 1980 applies to most foods that are purchased for home consumption Chewing gum and carbonated water are already taxed and will continue to be The governor39s proposal defines candy as a preparation of sugar honey or other natural or artificial sweeteners in combination with chocolate fruits nuts or other ingredients or flavorings in the form of bars drops or piecesquot The term candy would not apply to breakfast or nutritional bars potato chips pretzels popcorn sugary fruit products such as fruit rollups honeyroasted nuts cookies doughnuts cakes or products used in the cooking baking or decorating of baked goods Soft drinks would be defined to include nonalcoholic beverages that contain natural and artificial sweeteners Beverages made using milk soy rice or similar ingredients juices that contain more than 50 percent vegetable or fruit frozen fruit concentrate powdered fruit and tea are not included Energy tax credits conservation easements on the chopping block The proposal also would suspend 48 million in tax exemptions now granted for energy use by industrial and manufacturing concerns over a twoyear period Current law grants a tax exemption on the sale and purchase of energy used in industrial and manufacturing services in Colorado Ritter also proposed scaling back tax credits for conservation easements for a period of three years However the criteria are still being studied If the tax credit program is revised the governor estimates that the state would save 13 million in FY 201011 and 26 million in the following fiscal year Currently a donor of a conservation easement is allowed a credit against income tax for 50 percent of the value of the easement up to 375000 Under current policy the credit may be transferred to a future property owner In 2008 the state Legislature reduced the annual tax credits by nearly half from 100 million to 52 million The change in conservation easements Lambert said will be very controversialquot However the Republican lawmaker said the program has been troubled for years particularly by some property appraisals that appeared to be fraudulentquot and were challenged by the Colorado Department of Treasury Some of the appraisals and tax credits claimed on federal income tax filings have been redflagged by the Internal Revenue Service l39IH n39Hinni ittequot D L g t g t t 39 63544 PM Ritter39s new budget targeis tax credits Colorado Statesman le39nIli n in The governor also proposed eliminating a onetime tax credit of up to 6000 for the purchase of a hybrid or alternativefuel vehicle that averages only 30 to 40 miles per gallon The proposal does not affect a 7500 credit for vehicles that plug in to the energy grid The revision would save 125 million in tax credits in FY 201011 and 25 million the following fiscal year Another 15 million could be derived next year if the Department of Revenue tightens the eligibility for software purchase tax exemptions Changes in the enforcement of state tax collections on Internet purchases could raise 5 million Although online purchases are taxed by merchants that have stores in Colorado vendors such as Amazoncom which conduct business solely on the Internet and are marketed by Colorado Web sites and businesses do not collect sales tax from Colorado buyers Restaurant and food vendors would lose about 21 million in tax exemptions on the purchase of nonessential foodassociated items such as napkins bags cartons condiments and plastic ware The proposal however would keep exemptions for necessary containers such as beverage cups and soup bowls The farming and ranching industries also will feel the pinch The budget proposes saving 15 million a year over three years by eliminating tax exemptions on bull semen insecticides fungicides vaccines hormones and other products used in raising and tending livestock In addition the budget seeks a 29 million annual savings over a period of three years by eliminating the sales tax exemption on pesticide purchases The governor39s proposal aims to save 445 million a year by scaling back Corporate Enterprise Zone Investment tax credits and to garner 145 million annually in savings by suspending the sales and use tax exemptions for materials used by directmail advertisers In both cases current regulations would remain in effect for three years Lambert said the proposals to eliminate or suspend tax credits and exemptions are violations of TABOR noting that TABOR is the only protection we have against crazy politiciansquot Democrats however offered only praise for the Ritter39s new choices With a 1 billion shortfall these difficult decisions have to be made and thanks to Governor Ritter39s leadership we have a thoughtful lean compassionate budget The choices were not easy and the solutions were not obvious but we will continue to build a 215t century workforce and lead Colorado to a fast and strong recoveryquot said Senate President Brandon Shaffer DLongmont Lesliecoloradostatesmancom i Crmr rtll l itte D L 4 39 63544 PM The Denver Post January 12 2010 Tuesday LEGISLATURE 2010 Tense session ahead Lawmakers are in a nowin situation with constituents II as revenues are hitting bottom Tim Hoover The Denver Post The angry phone calls and letters have been coming into Capitol offices for months From teachers and school executives who don39t want lawmakers to cut K12 education From county commission ers angry about cuts to local aid to counties From senior citizens furious about the prospect of a propertytax break for the elderly being eliminated for a second year in a row The messages come from college presidents appalled about cuts to higher education and from business groups complaining about the potential loss of tax breaks and incentives For state lawmakers closing budget shortfalls totaling more than 1 billion in the 2010 session which starts Wednesday will be an exercise in disappointing many constituencies quotThis year is hard because I think this is permanent in the sense thatI don39t see things recovering soonquot said Rep Jack Pomm er DBoulder chairman of the Joint Budget Committee quotWe39re hitting bottom and we39re cutting things that are absolutely affecting people39s lives It39s not like we can say next year is going to get better because it isn39tquot Lawmakers are hoping revenues do not get much worse for the budget in the current fiscal year The state found out inDecember that revenues were off from projections by 40 million bringing the deficit for the current year to about 600 million Gov Bill Ritter earlier last year announced a plan to deal with the current year39s shortfall through more furloughs for state workers the closing of a juvenile mentalhealth facility in FortLogan the closure of a unit for the develop mentally disabled in Grand Junction and the early release of some prisoners That said Ritter and lawmakers still must deal with a budget shortfall of more than 1 billion in the 201011 fiscal year which begins in July Ritter a Democrat has proposed a budget for next year that includes A 260 million cut from K12 education Generating 1318 million by suspending or eliminating 13 tax credits and exemptions Saving 902 million by suspending for the second year in a row a propertytax break for seniors Cutting highereducation funding by 56 million Cutting Medicaid payments to doctors and other health care providers by 28 million Saving 201 million by a 25 percent cut in total compensation for about 25000 state employees Party squabbling The budgetslashing is likely to result in turmoil not just between ruling Democrats and minorityparty Republicans but among Democrats them selves Education groups have hinted they may challenge the cuts to K12 funding as unconstitutional Meanwhile some Democrats are still angry with Ritter about cuts made last fall to programs for the mentally ill and developmentally dis abled Republicans say Democrats have been doing a mostly lousy job of balancing the budget and should have made deeper cuts sooner quotRight now the way the budget has been balanced is through taxes and fee increases gimmicks and some cutsquot said Senate Minority Leader Josh Penry RGrand Junction quotbut the cuts represent a relatively small percentage of the actual budgetbalancing decisions quot Penry said Republicans probably would propose consolidating some state agencies imposing a stricter hiring freeze than one Ritter implemented in 2008 and running legislation quotto give the lieutenant governor something to actually do quotThe environment is changingquot Penry said quotThe people of Colorado are tasting the fruits of rule by big govern ment and they don39t like it quot Sen Moe Keller DWheat Ridge said Republicans are hypocrites When they were in charge during the last reces sion in the early 2000s they used many of the same quotgimmicksquot to balance the budget including eliminating the prop ertytax break for seniors quotFor all the years they were in office they did not reduce government Keller said quot They didn39t close one depart ment They didn39t do massive layoffs quot Democrats have said that Republican suggestions to balance the budget often fall apart under scrutiny quotThe luxury of being in the minority party is that they don39t have to be serious about balancing the budgetquot said Keller a member of the Joint Budget Committee Schoolfunding cuts Still one of the chief ideas for balancing the budget comes from Republicans this year cutting school funding Democrats resisted the idea in past years worried that cuts would violate constitutional mandates to increase K12 funding every year by at least the rate of in ation But Democrats tuIned to a legal memo prompted by Republican lawmakers inprior years that says the cuts are 1e gally possible House 1Linority Leader 1 ke May RParker said this session will be a downer for Democrats because they will have to finally face up to an empty piggy bank quotA Democrat who can39t spend is an unhappy person May said Pommer though said that if history is any guide Republicans are likely to complain about cuts especially over small programs that affect their districts Whether it39s agriculture programs or subsidies for the costs of installing a water well Republicans who represent rural areas will kvetch over the cuts Pommer said quotThey take a state subsidy as a Godgiven right Pommer said quotIt39s the kind of thing that anybody else in Colorado would have to pay for What39s in the of ng To help balance the 201011 state budget Gov Bill Ritter has proposed that nearly 132 million in tax credits and ex emptions be eliminated or suspended The proposals and anticipated revenue impacts include Suspending for two years a salestax exemption on all purchases of energy used in manufacturing Savings 48 million Eliminating a salestax exemption for candy and soft drinks 179 million Limit for three years the amount of losses companies could carry forward to offset income in future years to no more than 250000 a year 168 million Expanding the definition of what type of software is taxable including software purchased online 15 million Reduce for three years an incometax credit on conservation easements up to 375000 to a credit for no more than 175000 13 million Enforce salestax law on Internet purchases at online vendors with instate affiliates 5 million Limiting to 250000 per taxpayer each year for three years a tax credit for equipment purchased and used in an enter prise zone 45 million Suspending for three years an exemption for pesticides 29 million Repeal a state incometax credit for the wealthy that is tied to the federal quotalternative minimum tax system for high earners 25 million Eliminating a salestax exemption for cartons napkins condiments plasticware and other items used to serve food at restaurants 21 million Suspending for three years a salestax exemption for printed materials used in directmail advertising 15 million Suspending for three years a salestax exemption for animal vaccines hormones animal drugs bull semen and other compounds used in agriculture 15 million Scaling back a tax credit for alternativefuel vehicles 13 million Source Governor39s office Business groups vent at lengt httpwwwdenverpostcomc Page 1 of 4 denvergostxom 1E DEMtn POST business grouPs riled A marathon committee hearing continued late into the night Wednesday as a flood of business groups argued against eliminating 132 million of tax credits and exemptions as a way to help balance the state budget vent at lengthy Rep Jack Pommer a Boulder Democrat carrying several of the 11 bills in the package said at the outset of the House Finance Committee hearing that foes of nixing the tax breaks needed to elln lll latll lg suggest where else to cut tax The state will have to bridge a 22 billion shortfall in the current budget year that ends in June and faces at least a 13 billion deficit in the 201011 year By Tim Hoover The Denver Post Posted 01232010 01mm AM MST quotWe39ve shared cuts and now we39ve got to share revenue increasesquot Pommer said quotand I would Updated 01232010 055608 AM MST entertain suggestions on other things Extras Keep up with the latest political events and opinion at The Spot politics blog Full political news coverage I denverpostoomlpoitios i we could doquot r 1 One of Gov Bill Ritter39s proposals for balancing the current year39s budget would be withholding 48 Rep Cheri Gerou REvergreen asked Pommer million in severance tax grants money that goes to to withdraw the bills so Republicans could come local communities impacted by oil and gas drilling u with alternative cuts But Pommer chairman John Prieto The Denver Post p of the Joint Budget Committee refused to table Advertisement Endto End Training as It Should Be 100 ONLINE Earn Your Master Certi cate in Internet Marketing aSEOEPaidSaareh almernetlaw 9 llssmTzamgma Online Branding 9 Media Buying 1 USananonnne DomFD SAN WeirAnalyties SocialiMedia Print Powered By E 397 39Iziz Dynamics Business groups vent at lengt httpwwwdenverpostcomc denverqostxom l E Drawn POST them on the promise of suggestions to come quotYou39ve been here the wholetime during the budget crisisquot Pommer said quotAt any time you could have given us ideasquot After more than nine hours of testimony the Finance Committee had finished with only four 0 the 11 bills passing all on 65 partyline votes led by Democrats The bills go now to the full House One bill passed Wednesday would eliminate a salestax exemption for directmail advertising which would yield about 15 million in the 201011 budget year which starts in July and 290000 for the current fiscal year Directmail marketers such as Brad Cohen general manager of Valpak of Colorado said jobs would be lost in their industry But Rep Joel Judd DDenver chairman ofthe House Finance Committee said the state would probably end up cutting deeper into funding for public schools if it didn39t find more revenue to help balance the budget quotI don39t know how to say to constituents 39We39re going to take money away from educating your child in orderto save a tax benefit forthejunk mail industry quot Judd said f 1 Rep Jack Pommer refused to table the bills Cohen contended job losses would be worse for a community than cuts to local schools quotlfthey constituents lose their health insurance you39re going to have a much bigger problem than a school closingquot he said Another bill that passed would impose sales tax on some online purchases by requiring instate websites affiliated with marketers such as Amazoncom and Overstock com to pay sales tax The measure is expected to generate 5 million in 201011 and 1 million in the current budget year But representatives of online marketers said the measure would just punish the affiliates who would find themselves dumped by the outof Advertisement Bring the Classroom to Your Home With a Degree Online From Florida Tech Florida Tech UNIVERSITY UNLINE APPLY TODAY FloridaTechOnlinecomFD 18382535946 Print Powered By E 39Izix Dynamics Page 2 of4 Business groups vent at lengt httpwwwdenverpostcomc denvernostxom l E Drawn Post state marketers whose products they are helping sell The state would never see the tax revenue they argued In a twist business groups representing Colorado retailers such as bookstores testified in favor of the bill removing the exemption They argued that it was unfairfor retail stores in Colorado who often sell online themselves to have to pay the sales tax while their instate competitors without physical locations did not The hearing grew testy at times with Gerou accusing Pommer of quotbadgeringquot corporate officials who came to testify Pommer shot back later that Republicans talked a lot about cutting the budget but kept fighting cuts to programs that affected their districts And Rep Ellen Roberts RDurango said she didn39t like lawmakers referring to quotcorporate loopholesquot or quotspecial interestsquot quotThis is a state built on small businesses that are often corporations of one or two people she said Some of the most passionate testimony came as the committee heard a bill to remove the sales tax exemption on candy and soda a measure expected to generate 179 million in 201011 and 36 million in the current year quotIt39s gotten so desperate that now we39re going after kids39 candy barsquot asked Rick Enstrom whose family owns Enstrom Candies of Grand Junction As Ritter offers more cuts state still 150 million out of balance Gov Bill Ritter said Wednesday that he plans to fill a remaining 475 million hole in the state budget by ending some tax breaks sooner and withholding more in severancetax grants to communities affected by energy development But the state is still technically about 150 million out of balance forthe current year because legislators have not acted on all of Ritter39s balancing proposals yet and because some costs have increased Legislative economists said in Decemberthat the state would be another 40 million short of r evenue projections in the 200910 budget year which ends in June But Ritter s budget officials said increased caseload costs statewide had pushed that number closerto 475 million That means the state will have dealt with a total shortfall for the current year of nearly 22 billion It faces another shortfall of at least 1 3 billion in the 201011 budget year which begins in July Ritter last fall proposed a number of budget balancing actions to deal with the shortfall in the current year but lawmakers have not approved about 120 million worth of his recommendations Some items they are still Advertisement USF UNIVERSITY SAN FRANCISCO EndtoEnd Training as It Should Be 100 DNLINE Earn Your Master Certi cate in Internet Marketing SEO E Paid Search 9 Intarnatlzw 9 UnlineiBranding Wan Analytics 1300269 9943 9 Media nying i 7 Sociamwa 9 lJSanFranOnlmemmED Print Powered By W quotr 2 Dynamics Page 3 of4 Business groups vent at lengt httpwwwdenverpostcomc Page 4 of 4 de nverpostcom Tun DEM1m POST reviewing and in other cases their estimates of funds used to build higher education facilities savings differ from Ritter s Tim Hoover The Denver Post In a few cases such as imposing afee on gun purchasers to pay fortheir criminal background checks the Joint Budget Committee has rejected the governor s proposals And there is about another 30 million of the 150 million resulting from higherthan expected costs most of which is from the state39s Medicaid program Ritter39s plan announced Wednesday relies on eliminating seven tax exemptions by March which would generate an estimated 188 million His plan relies on using another 48 million from severancetax grants money that goes to local communities impacted by oil and gas drilling Other parts of the plan include Cutting an additional 55 million from higher education a cut that will be backfilled with federal stimulus money in the current year but which will mean a larger cutto higher education in 201011 Refinancing certificates of participation for the Anschutz Medical Campus in Aurora saving the state 42 million Tapping 43 million in federal minerallease Endto End Training as It Should Be 100 ONLINE Advertisement Earn Your Master Certi cate in Internet Marketing f Search 9 Internatlaw a gt Unlina Branding 9 Media Buying i usanFmonnne DomFD SAN thAnalyties SocialiModia Print Powered By E 39Izix Dynamics Business groups come up she httpdenverbizjoumalscom Page 1 of 2 Mauls Lag nx um Raymund Mg umr a anquot mp5 nuwu an Jnum Jme 29 2am INES39S39 JOURNAL FndayJanuavy292EHD Mndmed SundayJanuavy32EHEl Business groups come up short on changes to tax measures wenvev Eusmess Juuma e by Ed Seaher the 10 bus a u Monday If passed year begmnmg on July 1 After a V n m Hw mmwr retumed to work Fnday mommg shortfall but 1t passed four omers opposed by Repubhcans r nu 11 m n r Ah w n Mark FerrandmoDrDenverHI hatmeasure wouldford1e next thm r 39 when calculatmg mar mx payments MPnk nHmmrPJlI d uu rth nth H H t rlt 1 an n H rd mm Qwesl Communications International In mm n F r peroentom taxbreak under the b111wh11e break he noted Thn M rm b smdw n h m mu PrEvergreen leaveth tat nam W who t t that cares more about gmwmg government than growrng busmess7quot A A h r y A r Th 1 en v h n t d any educated people m thxs statequot Ferrandmo sard Intd as me defeated amendment Repubhcans and Qwestomoralssard m ur sda or commg back Fnday was trustranng L L quotsaxd Loren Furman vrce presxdentofgovernment affarrsfor 39 39 Tndu Ir Tn th nd esealnuer bzz1nurn51smm 303780379229 Colorado House OKs elimina httpwwwdenverpostcom Page 1 of 2 denverpostcom 39lliE menn POST egislature2010 Colorado House OKs eliminating some taX breaks By Tim Hoover The Denver Post Posted 02022010 010000 AM MST Updated 02022010 060531 AM MST The House passed a package of bills Monday to eliminate select tax breaks for businesses but a handful of Democrats several facing tough re election fights broke ranks and voted against repealing some of the exemptions and credits Monday39s debate which lasted over four hours marked more than 30 hours in which the bills targeting industries ranging from agriculture to online retailers had been debated on the House floor or in committees The eight bills now can go to the Senate quotWe39re asking big business to pay theirfair share so that we don39t have to keep balancing the budget on the backs of teachers police officers and firefighters senior citizens and the neediest who depend on our safety netquot said House Speaker Terrance Carroll DDenver quotlt39s only been the GOP and their specialinterest cronies who have been complaining because we39re rolling back corporate welfare and special interest tax loopholesquot But Republicans said the bills would just increase taxes on businesses many of them small that provide jobs to ordinary Coloradans quotThe Democrats39 rush to tax the citizens and businesses who make up the backbone of Colorado39s economy came fullcircle this morningquot said House Minority Leader Mike May RParker quotAfter hours of testimony from business owners and citizens who oppose these tax increases Democrats still chose to ignore that message and take them one step closer to realityquot The eight bills are expected to generate as much 64 million forthe 201011 budget year that begins in July lfthree more bills make it in the package that total could increase to as much as 140 million The bills come from Gov Bill Ritter s proposal to eliminate or suspend 13 tax exemptions and credits The package started as 12 bills but two of the bills are still being worked on and a third was dropped A fourth bill which would eliminate the salestax exemption for energy used in the manufacturing process won initial approval in the House on Monday but awaits final approval before it goes to the Senate Advertisement iUSF UNIVERSITY SAN FRANCISCO EndtoEnd Training as It Should Be 100 ONLINE Earn Your Master Certi cate in Internet Marketing SEO E Paid Search 9 Intarnatlzw 9 Unlineiltranding Weir Analytics Monrzseam 9 Media Buying l39 Sociabmdia lJSanFranOnlmemmED Print Powered By E 39Izix Dynamics Colorado House OKs elimina httpwwwdenverpostcom Page 2 of 2 denverpostcom 39lliE DEMtn POST That bill would have advanced Friday night with quotI don39t think it will work39I Rep Joe Rice D the other eight bills were it not for a breakdown Littleton said of the bill arguing that the in a truce with Republicans that came close to legislation would only hurt instate websites midnight after nearly 10 hours of debate that affiliate with outof state retailers Rep Randy Fischer DFort Collins offered an Rice39s seat has been targeted by the GOP in its amendmentto exempt the recycling industry effortto retake the House from having to pay taxes on energy it uses The amendment also would have directly benefited a Tim Hoover 3039541626 or steel plant in Pueblo that is the largest scrap hooverdenverpostcom metal operation west of the Mississippi and provides many union jobs Republicans who had agreed not to prolong debate on the bills said the deal was off They said Democrats who accuse them of looking out for quotspecial interestsquot were being hypocrites by offering such an amendment On Monday Fischer agreed to withdraw his own amendment The House then gave the bill initial approval though the measure still was amended to exempt farm fuel from being taxed Democrats hold a 3728 advantage in the House but a total of nine Democrats broke rank at times to vote againstthe bills Rep Kathleen Curry of Gunnison the legislature39s lone unaffiliated lawmaker voted against four of the bills One bill to remove the sales tax exemption for online sales through outof state retailers narrowly passed 3332 with four Democrats voting no Advertisement EndtoEnd Training as It Should Be 100 ONLINE Earn Your Master Certi cate in Internet Marketing aSEOEPaidSaarch almarnatlzw 9 kmmzsmsgw 9 UnlinaiBranding 9 Media Buying i usanFranon ne DamFD I Welt Analytics 9 SocialiModia Print Powered By E 39Izix Dynamics Colorado candy tax plan unfa httpwwwdenverpostcom denverpostcom lllE DILM39ER POST guest commentary Colorado candy taX plan unfair By Rick Enstrom Posted 02042010 010000 AM MST Gov Bill Ritter s proposal to tax Forrest Gump39s box of chocolates as well as many other candies is barreling through the Colorado legislature faster than a speeding bullet and well before Colorado consumers have an inkling that their favorite candy treats are about to cost them more The rhetoric around this tax has suggested lofty goals such as building a quot21st century workforcequot and quotpreserving the future for Colorado kidsquot The truth is the adoption ofa discriminatory sales tax will have a huge and immediate impact on many small confectionery businesses like Enstrom Candies which has been manufacturing and selling confections in Colorado for 50 years Last year our sales were down because of the economic recession and we were forced to lay off members of ourworkforce In addition to our nearly 150 employees we also paid more than 33 million to 340 different Colorado vendors last year Enough already The last thing local businesses can afford in these difficult times is to raise their prices through taxes or any other means In addition to the impact on the business of candy the tax proposal is discriminatory as well as confusing Candy is being singled out as an quotOKquot food to tax because it39s not a quotnecessaryquot food Tell that to all the daughters wives girlfriends friends grandmothers and co w orkers in your life who smile with pleasure at the mere thought of chocolate And tell that to the producers of butter peanuts almonds cocoa vanilla blueberries cranberries and the many other wonderful ingredients in our products These same ingredients are also in ice cream fudge brownies peanut butter and blueberry pie yet these items will not be taxed And to further add to this nonsensical tax the definition of candy is not straightforward In the bills under consideration in Colorado a chocolatecovered pretzel would not be taxed but a chocolatecovered strawberry would These ambiguities will cause very real collection and enforcement problems at the retail level especially for retailers lacking scanning equipment It makes more sense from a tax policy standpoint to treat all food the same Finally let39s face it taxes on any food items are among the most regressive taxes in America Lowincome persons spend a larger portion of their income on food purchases than do the more Advertisement Q Florida Tech UNIVERSITY UNLINE APPLY TODAY Bring the Classroom to Your Home With a Degree Online From Florida Tech FloridaTechOnlinecomFD 18332535946 Print Powered By Ii 7 39i 2 Dynamics Page 1 of2 Colorado candy tax plan unfa httpwwwdenverpostcom Page 2 of 2 de nverpostcom TUE DEMEu POST affluent It is the poorest citizens of Colorado who will bear a disproportionate share of the burden imposed by discriminatory food taxes including our elderly citizens Not surprisingly food taxes are among the least popular taxes with voters And that39s Why of course this tax is being rushed through the Colorado legislature before too many constituents know that one of their favorite inexpensive small pleasures in life is just about to become more expensive Rick Enstrom of Lakewood is regional manager of Enstrom Candies He is a retired county commissioner retired Wildlife commissioner and former member of the Board of Great Outdoors Colorado GOCO Advertisement Bring the Classroom to Your Home With a Degree Online From Florida Tech Florida Tech UNIVERSITY UNLINE APPLYTODAY FloridaTechOnlinecomFD 18882535946 Print Powered By E 39Izix Dynamics Tax exemptehs at heart er tmtmvevsv cdaaee Statesman Net Mgmbg r Mmm nnc low Guest mumhs rcmuus znua Demeerate Natmna Cnnvemmn Jerry Mew xnhermew lav FDX S the Game perttrhk Thase Were me Days an 0191 Sutsehte omha Anvutmma Phht ndvemsm peht ca cehhemehs mom cehtaet Us sutmrssmhs t Edlturia emeehnes t hm w Tax exemptions at heart of controversy WES2mm Marianne Gnndland cameo mew 1m MunHumanI mmm m Wm mm m may ny we February 9 2010 Vol m No a The batt e a new h us SEEDnd week atthe state Camtn Lawmakers an ether sme er the aws es have been feudmu Ever the package er ks eh such thhes as eahdv ahe Sada sertware energy use eeuperatwe mreet ma aha aurmu mra preeuets Thursdav arterheeh Senate REDubhcans e unEE thev The Drunusa weme ask Gav am R tter te ehaet u 25 per eutte the GENEra re than smunnn per veer Fur 2n1ue11the con man weme ask the Duvemur te enact a 4 4 percent stress the beard spehmhe cut bv earthth te rt J ehmhate heheessehuaw er vaca 52 6 29 B W39 WW 9925 p 2d the state But sa a es Dung a study that Sa d state e e Aeeerehete the REDubhcans thwswuu d shave WW 523mm tree up same 5 mmch and WDu d aHDW ate te restere the 52mm hemesteae tax ExEm tmn we H h eehterehee whether these hres were necessarv PXVD nen m h hth r pehrv resmtee m c nsures uffamhues ander state emumvee me Dsses mthe r msthets The heuse HHEHEE CDmrmtteE swarmed SM er the 12 ms ehJah 27 and h the h a 1nd vdteunlan 29 The Last hm HB 12mm Whmh eeaws wth ehteruhse Tax exenpncns at heart cr tcntmvevsv cdaadc statesman zcne nvestmenttax credns has ndt vet peen heard by the chse Apprcpnadcns Cum rn ttEE Dmnuedtu spend ch a the pms LedeTatcrs have hcurs at the came depaun dn dncn smn chse Apprcpnancns Ccrnnnttee Sen KeTth ng Rscmcradc Sprwgs The n r h T n V Dppurtumty fur success thdn he saTd Wuu d rerernnd td the package at pms as the mad tc rncre pubh sectcr jabs d dTrtv czen WW2 Dernccrats ccuntered wdn caHmQ dnern wema Trterest tax r u h Rs Dernccrat has saTd thev shumd aH busmesses39 pm when t carnetp mp Dsses Men Mav amnu n Huqu u Ecnnnmm chmken WTth busmess cwners Wm cast Cumradn mps her a a mva the Easter Burmv and cupTd refemng tc HB 1194 that Wuu d restnretaxes cn candTes dwen fur Easter and Va enune39s Dav T nrDenver m a press reTease a sn cn Fndav M n AH chse the pms RED Wes MEKWEV DrWth vdted Egamst aH eTght pms The narrcwest vute 33732 was far HB nu rErmt sa es taxes That pm was arnended assuade ccncerns trcrn Cumradnrbased busmesses Mk2 Under the amendment the de mtmn ct af hate was changed rrdrn a perscn WW9 m cmcradc that a puphctcrurn statewh Md r T T m an nnn r uanr she saTd th m T Wuu d Just terrmnate the r2 tmnsh u The ast pm tc make I cutcr the chse m the past Week was HB 119m an d dtechm Curr m an ts ne Hnus vnte was waved um Wednesdav xtpassed 354m HE 119D Exem t aurmu mra and af rmed ndt appear ta cumnue mm the Senate Druceedmgs m n u n m vendurs and restaurant Dwners Sen cred araphv RsWrav tn d H s feHDW cumrmttee rnernhersthatthe mus WU extend the cr s s fur the state and urwate sectnr Jabs Sen Kath KWQ Recamrada Sunngsr asked r unvernmzntmbs and prwate satd wuu d ead ta mDrE Dubh sectm Jabs Jane Urseheh deuutv Executwe dtreetar er the Cumradu Assumatmn 9f Sehaa 1 aaards m dthe cummwtteethatthe Ebert Cnuntvr 1 h t deddesaan mether 1t Wuu d dase HS sahad rar dadd because 9f the huddet auts 1t faces that caeaecma had seen a veemtd HUEESE W1 WW 5 Wquotme DSES 5 SEHDD t sa as dunnd the 551 2d years even m tha ases ts heartand arten us unw states that had nnpased the sada tax busmess shesawd a hM n1asnrau er Vnu dan39t Tax exemptions at heart of controversy Colorado Statesman hH nIli n in tax people who create jobsquot he exclaimed If you get out of our way us private sector folks will fix the economyquot McNeaIy said he owned an Internet business with affiliate relationships and had received termination notices from outofstate businesses You guys need to figure out if this is what you wantquot he said The bills debated in the Senate Finance Committee Wednesday all passed along 43 party lines Gary Yeats vice president for corporate taxes and tax counsel for Valassis Communications told the committee HB 1189 concerning exemptions for cooperative direct mail would not likely generate the 800000 projected in a revised fiscal note Yeats said his company represents a third of cooperative direct mail distributed in Colorado and Valassis would end up with a 200000 tax bill under HB 1189 Those taxes would be passed onto advertisers harming their bottom line For every dollar reduced in their businesses revenue it would represent a loss of 46 percent in income tax Yeats said You will collect 29 percent and lose 46 percentquot But Phil Horowitz of the Department of Revenue disputed Yeats39 estimates saying there were more businesses that fell under the definition of cooperative direct mail than the ones Yeats was including The bill on ending tax exemptions for candy and soda HB 1191 drew less than enthusiastic support even from Democrats Finance Committee Chair Sen Paula Sandoval DDenver said she was not comfortable with the definition of candy in the bill under HB 1191 sweets made with flour like Twix or Kit Kat candy bars would be counted as cookies rather than candy and hence not taxed Horowitz explained that this was a definition used in other states and that flour had to be mentioned prominently in the list of ingredients in order for the food to be exempted from the tax Chris Harr of the Colorado Beverage Association and Pepsi Bottling of Denver warned that increasing the price by 29 percent would reduce sales by 19 percent to 28 percent That could result in the loss of 370 to 800 jobs he said and as much as 18 million in wages But those figures were disputed by Sen Michael Johnston DDenver who pointed out that CocaCola had seen a fivefold increase in sales during the last 20 years even in the 34 states that had imposed the soda tax Those concerns prompted an amendment to put the exemption back into effect in three years an amendment offered by King and supported by Sandoval The committee39s last bill of Wednesday evening was HB 1195 on lifting an income tax exemption for purchases of certain vehicles that use alternative fuels As of press time Thursday the committee was scheduled on Thursday to take up four more bills including HB 1193 the bill requiring outofstate retailers to collect sales taxes Maria nnecoloradostatesmancom inn c ull Fight rrm l l39jrrt rtll l t t39 L 63310 PM The Denver Post February 14 2010 Sunday Aggressive rst moves Attempts to cut businesstax exemptions have hurt al liances and led to threats of lawsuits Miles Moffeit The Denver Post In recent weeks the mailboxes of Colorado lawmakers have bulged with letters from employees of some of the state39s largest corporations decrying efforts to reduce longtime tax breaks Hundreds of notes ooded in from employees of the Pepsi Bottling Group saying they oppose a new sales tax on soda products One Pepsi employee who supports cutting the tax break said the company had supervisors provide the opposition language to workers Pepsi which employs about 1000 people in Colorado said it did not pressure its employees to take the political stand quotBy no means was this a coercive exercisequot said Jeff Dahncke Pepsi39s director of public relations quot The reason you saw a lot of letters coming from employees is because a large portion were concerned about the new taxes quot Companies such as Pepsi CocaCola and Ciber and business groups such as the Colorado Association of Com merce and Industry and the National Federation of Independent Businesses lined up together in one of the largest mobi lizations of business interests in years to unsuccessfully fight the elimination of 13 business tax credits and exemptions worth roughly 140 million As the legislature grapples with a deep recession and the resulting revenue shortfall of 13 billion be hindthescenes tactics have not been restricted to businesses Lawmakers used aggressive procedural maneuvers raising questions about whether they attempted to sti e public debate and drag discussions deep into the night to commandeer the agenda The tactics by all parties and level of invec tive led to hurt feelings accusations of truth bending fractured political alliances and threats of lawsuits that could gum up the legislative process later this year experts say quotThat39s the frustrating part said state Rep Jack Pomm er DBoulder who sponsored several of the taxbreak re peals quotIn the past the business community has had credibility but this signaled to me very strongly that they39re looking out for themselves So much of this is phony outrage quotThat39s not fair play From the business community39s point of view state leaders worked to game the system by slamming through what they called tax increases early in the session The targeted tax breaks include salestax exemptions for candy soda downloaded software and various agricultural products and a tax credit for alternativefuel vehicles The package also would put limits on the ability of companies to carry net operating losses in prior years forward on their tax liability quotThere has been a lot of concern about lawmakers moving too fast in the beginning said Sandra Solin founder of Capital Solutions a lobbying firm for the software industry and others quot This and other issues elicited a stronger en gagem ent by business people such as software firms that haven39t previously taken part in the political process quot For example companies found out that Democratic leaders planned to shoot Gov Bill Ritter39s package of taxcredit and exemption changes straight to the appropriations committee bypassing testimony in the finance committee which is usually the first stop for such bills That prompted a flurry of latenight calls from the business community and GOP leaders to the governor39s staff and Democratic Party leaders protesting that the public would be cheated of a full airing of issues Also during a heated Senate discussion of the bills Monday a handwritten sign was posted outside the entrance to the chamber saying quotno cards signed Democratic Senators It was a goaway signal to business lobbyists who rou tinely engage in discussions with lawmakers by delivering business cards through the sergeant at arms to coax the sena tors into the foyer to talk quotThat39s not fair play said one lobbyist Legislative leaders acknowledged making some mistakes with procedural moves They agreed for example to al low the finance committee testimony on the bills But Sen Rollie Heath DBoulder said the business lobby and Republicans who aligned themselves with business pushed the envelope on rhetoric quotEvery one of these bills is a job killer asked Heath a longtime businessman referring to the refrain of CACI a state business lobbying group quotTo say a 29 percent hike or a few cents on a soda pop is going to destroy the soda pop business That stuff blows my mind quot As the opening weeks of the session blurred into one another and voting extended to midnight on some days insults sometimes disrupted the debates Democratic lawmakers and their witnesses were called SOBs cowards and elitists Difficult to work together Longtime observers of the process such as Rich Jones of The Bell Policy Center said he fears the intensity which split the usual coalition between education and business lobbyists could cast a pall over the rest of the session Already the business community is promising to pursue lawsuits over all the bills saying they violate state laws limiting taxation Solin said sizable campaign contributions could be shifted away from Democratic leaders in the upcoming election quotI think there39s more tension and a lot of angst among the members over this stuff than it would be normally Jones said quotWhen you39re aggravated and frustrated and there are other bills coming down the pike it will carry over and could make it more difficult for folks to work together quot Miles Moffeit 3039541415 or mmoffeitdenverpostcom Local News l Gregoire proposes new taxes on soda water candy l Seattle Times Newspaper ElbeSeattleCimes Thursday February 18 2010 Page updated at 0808 AM Permission to reprint or copy this article or photo other than personal use must be obtained from The Seattle Times Call 206 4643113 or email resaleseattletimescom with your request Corrected version Gregoire proposes new taxes on soda water candy By Andrew Garher and Jim Brunner Seattle Times staff reporters OLYMPIA a Saying she39s shown the Legislature quotthe way to go homequot Gov Chris Gregoire on Wednesday proposed raising 605 million through new taxes and by ending existing tax exemptions and credits Gregoire39s plan contains no general salestax increase as favored by some Democrats in the Legislature Instead the governor would focus on outofstate companies triple an existing chemical tax and add taxes to discretionary items such as candy soda and cigarettes The three biggest tax proposals are a nickel increase in carbonated drinks expected to bring in about 94 million a 1centper ounce tax on bottled water that would bring in about 135 million and a tripling of the state39s quothazardoussubstance taxquot on petroleum pesticides and other chemicals that would raise 148 million for the state general fund In the Seattle area Gregoire39s proposal would mean adding the 95 percent sales tax to every purchase of candy and gum Overall the governor39s package includes 14 proposals to increase taxes or close exemptions part of a plan to deal with a 28 billion budget shortfall quotI39ve tried to do what I consider the most balanced responsible approach that I could find knowing full well there39s going to be a really big debatequot Gregoire said at a news conference in her office The governor said of her tax package quotI39ve shown them the way to go homequot It39s not clear if lawmakers will follow her lead Sen Rodney Tom DBellevue a key budget negotiator in the Senate said his caucus is quotall over the boardquot when it comes to tax increases So far Senate Democrats haven39t decided how much money should be raised through taxes he said Gregoire39s proposal is a quotgood startquot he said but added quotOur caucus members are all free agents I39ll wait and see how this impacts themquot Also although the governor didn39t propose a general salestax increase the Legislature has not ruled it out House Majority Leader Lynn Kessler DHoquiam said she39d prefer a temporary salestax increase that would go away as the economy improves That approach would be simpler than a smorgasbord of specialized taxes and wouldn39t single out certain industries over others she said quotBecause it39s an exceptional recession we should have everybody take part in protecting the things we need to protectquot said Kessler Republicans contend tax increases will hurt the economy and maintain the state should close the budget gap through cuts and by httpseattletimes nwsourcecom 39 39 UlVIl t llmPnliid20111n0 n1 9 H quot71d UU3925 lu 1 7227 U10 64838 PM Local News l Gregoire proposes new taxes on soda water candy l Seattle Times Newspaper finding cheaper ways to provide services Rep Ed Orcutt RKalama called Gregoire39s plan quot605 million in taxes that our economy can39t affordquot He said for example that the sales tax on candy and gum would be quota nightmare for retailersquot because some candies such as Twix that have flour in them would be classified as food and remain exempt from the sales tax Gregoire defended the tax increases saying quotI don39t believe the economic recovery of the state of Washington relies on cigarettes candy gum bottled water and pop I don39tquot Senate Democrats are expected to come out with their own tax package next week followed by the House Tom said the Senate has been waiting on the Legislature to suspend Initiative 960 the taxlimiting measure that requires a two thirds vote of the Legislature for tax increases A final vote is expected soon Lawmakers have to close the 28 billion gap in the current twoyear budget which runs through June 2011 The shortfall represents the amount of money it would take to pay for current state services compared with the amount of tax revenue the state is expected to collect The governor39s office projects it would cost about 324 billion to maintain existing services through June 2011 and leave 512 million in reserve However the state expects to have only around 296 billion in tax revenue and other resources on hand to pay the bills Gregoire and Democratic leaders in the House and Senate have said for weeks they plan to solve the problem through cuts in spending and tax increases Democrats say that unless the state brings in more money through taxes the Legislature will have to whack programs such as subsidized health insurance for thousands of lowincome workers aid to people who can39t work because of disabilities and financial aid for lowerincome college students Counting her tax package Gregoire is proposing nearly 1 billion in budget cuts Key elements of the governor39s tax package and estimates of how much the new taxes would raise include a Oil tax Triple the existing quothazardous substancequot tax on oil and other chemicals to raise 215 million Of that 148 million would be dedicated to the general fund with the remaining 67 million devoted to cleaning up polluted stormwater harmful to Puget Sound and other waterways Most of the money would be paid by the state39s five oil refineries a Bottled water Add a 1centperounce sales tax on bottled water raising 135 million a Soda Add a 5cent tax per 12ounce can of soda and repeal a businessandoccupation tax credit that companies receive for syrup used to make soft drinks That would raise more than 100 million a Cigarettes Raise the tax on cigarettes by 1 to more than 3 per pack That would raise an estimated 89 million while discouraging smoking a Candy and gum Extend the state sales tax to candy and gum to bring in 28 million a Outofstate businesses Impose taxes on some outofstate companies on the portion of business they do here The so called quoteconomic nexusquot tax would mainly hit banks and creditcard firms raising 73 million a Tax loopholes Support a plan by the Department of Revenue to close several quotabusivequot tax loopholes by which companies dodge or reduce taxes That would raise about 12 million httpseat etimes nwsourcecom 39 39 n19rlnmimentiid2011 no m9 H quot71d 003925 lu 1 7227 010 64838 PM Local News l Gregoire proposes new taxes on soda water candy l Seattle Times Newspaper In addition Gregoire supports legislation to clarify state law to recapture revenue the state could lose as a result of recent court rulings The largest chunk comes from a ruling that said an outofstate foodseller qualified for a state tax exemption In all the legislation would save or restore an estimated 170 million for the budget The governor also is hoping the federal government will send the state 435 million in additional aid Andrew Garber 3602368268 or W Jim Brunner 3602368267 or Copyright The Seattle Times Company httpseat etimes nwsourcecom quot 39 n19rlnmimentiid201I no m 7 H quot71d UU3925 lu 1 7227 U10 64838 PM harsh wads pmer pames surmurd Lax EXEWDQDH pTus cdaadd Statesman rm Mgmbg T Inn an lmm mnermew Jay Fax thq de Dmmhth Thase Were the Davs up cm Sunsehte omha unvmmma rhh Adv m nq puht caT cahhemahs mou39r cehta s Suhrmssmn p Emma eurdehhes February 19 2010 Vol m No a z rmu w Harsh words bitter battles surroun exemption bills mm BY Marianne Gnndland rue cameo 5mm 11 TVulrHlmumI MNAN 1w WWW lrmmlt39dm m n rrh Terh Wasa am RTtterrdr weeks hr hr the pms were amended W the Senate Tast Week and reduTred hduse EDDrDva aH erht ddtthat aDDrDVa and were Tesuassed Tuesdav The ruhe HEW head td Gav am RTtterrdr sTthh9 The pms dhtheTr wav tn RTtter are HB 11 d HB 1199 suspehdhd the EXEWDDDH ph ThdusthaT rueTs saTes and use taxes HB 1191 ehrmhdtmd the eahdv ahd sdda saTes tax Exem tmnr HB 119 apphhdthe state sexes and use taxes tn thuse purchases HBHU HB 1194 restaurarts HB 1195 suspehdhd the state saTes and use tax EXEWUK DHSfDr 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