Committee kills bill to evaluate corporate tax breaks
A bill to monitor and review tax credits and other exemptions by the state that result in reduced tax revenues, and provide that information to the legislature and public in annual reports, was killed in committee last week.
The state issues about $2.2 billion each year in tax credits and exemptions, about 22 percent of its budgeted revenues. The state also has budget shortfall for the current fiscal year of about $20 million, with a more than $1 billion shortfall projected for the coming fiscal years. Cuts to services and programs proposed this far to deal with the shortfall include $375 million in cuts to K-12 education and tens of millions in cuts to senior services.
"A tax expenditure should receive a periodic and comprehensive review as to its total cost and effectiveness in achieving its objectives," House Bill 11-1104 states. "(A)nd it is important that the state government be accountable and transparent in such a way that the general public can understand the value of tax expenditures given by the state."
The House Committee on Finance voted 7-6 along party lines to indefinitely postpone the bill, essentially killing it. "The bill was intended to look at these tax expenditures ... how these are working, what are they doing, how beneficial, how good or bad they are, whether they're meeting their objectives" Rep. Mark Ferrandino, the bill's sponsor, said. "Where we expend dollars for programs and services gets a lot of scrutiny, but when we expend money for tax breaks we don't have that same level of scrutiny. We do it once, and then it kind of goes along on its own and never gets reviewed again."
About 30 other state governments currently produce annual reports on tax credits. The Department of Revenue last released a study on tax exemptions in 2002, with the most recent exemptions examined by the department in 2006.
The passage of the bill had also been championed by the non-profit fiscal analysis group, The Bell Policy Center, which criticized the state's current lack of systematic tracking of exemptions. "We enact them and then forget about them. Yet they account for more than one-quarter of our General Fund revenue and are paid ‘off the top,' before we fund any other aspect of state government," Rich Jones, the center's director of policy and research, stated.
A similar bill had been introduced in the legislature in 2009. House Bill 10-1429 would have required the justification of public benefit and interest regarding tax breaks for corporations operating within Colorado. It also was defeated in committee. "That bill would have automatically sunset all (the exemptions), then we would have had to renew them," Ferrandino said. "This didn't do anything except for start providing public information about these expenditures, just like every other expenditure in the state."
Ferrandino stated that he was currently in discussion with members of the state senate regarding the possibility of transferring aspects of HB 11-1104 to a senate bill.