House panel passes bill to restore tax exemption on soda
By Tim Hoover
The Denver Post
A bill that would restore a sales tax exemption on soda cleared a House committee today over the objections of Democrats who said it would blow a $12 million hole in the state budget.
The sales tax exemption on soda was one of a slew of tax breaks that were suspended or removed last year by a Democratic-controlled legislature in an effort to generate more than $100 million in revenue to help balance the state budget. But with Republicans in control of the state House this year, they have vowed to try to restore some of the tax breaks, or in their view, repeal tax hikes.
Rep. David Balmer, R-Centennial, is sponsoring House Bill 1162, which he said was necessary to restore fairness to taxation. Under the law, some sugary beverages – like ones made with juices or milk – are not taxed while diet sodas are taxed.
Balmer also told members of the House Finance Committee that beverages were, like other groceries exempt from taxation, an essential.
But Democrats on the committee asked where the money would come from in the state budget to pay for the $12.3 million cost of restoring the tax exemption.
Balmer did not directly answer the question, saying only that "the state of Colorado needs to learn to live within its means."
The state is facing at least a $1.1 billion shortfall in the budget year that begins in July. Gov. John Hickenlooper, a Democrat, has proposed deep cuts to K-12 education and colleges to help balance the budget.
Democrats also asked Balmer why he did not choose to restore the tax exemption on candy, which was taken away by the same bill last year that removed the exemption on soda. Balmer said he wanted to focus on a more modest proposal that only represented restoring about 10 percent of the tax breaks cut last year.
Supporters of Balmer's bill included Chris Howes, a lobbyist for the Colorado Retail Council and the Colorado Beverage Association. He said his organizations viewed taxing soda as regressive, "big brother" policy.
Opponents of the bill included the left-leaning Colorado Fiscal Policy Institute and the Bell Policy Center. Both groups said K-12 and other vital programs would suffer more if the tax exemption were restored.
Rep. Dan Kagan, D-Cherry Hills Village, argued that the demand for soda is so non-responsive to price fluctuations that consumption is little affected by collecting the state's 2.9 percent sales tax.
Balmer, though, argued that consumer demand wasn't the issue, saying lawmakers could decide that allowing the tax was unfair even if consumers hadn't noticed.
The tax exemption for soda was one of dozens lawmakers considering repealing after a court decision several years ago that said the legislature could repeal tax credits and exemptions without voter approval as required of tax increases under the state's Taxpayer's Bill of Rights.
Despite the court ruling, Rep. Spencer Swalm, R-Centennial, said he thought eliminating the tax exemption was wrong.
"I don't care what the (Colorado) Supreme Court said," Swalm said. "We have a role in deciding what the constitution says as well as they do."
Balmer's bill now moves to the House Appropriations Committee, which must approve it before the legislation can go before the full House.