By

Dan Pilcher

CACI Senior Vice President

& Chief Operating Officer

Phone: 303.866-9600

E-Mail: dpilcher@COchamber.com

Friday, April 4, 2008

CACI-Opposed $57 million “Sin Tax” Bill on Alcoholic Beverages Dies a Bi-Partisan Death in House Committee

HB-1341, had it become law, would have increased the rate of the state sales and use tax on the retail sales of alcohol beverages by two percent, which would have raised $57 million to fund the Children’s Basic Health Plan.

The bill, sponsored by Representative Jerry Frangas (D-Denver), would have referred to the voters a referendum for the November election because, under the Taxpayers Bill of Rights (TABOR) Constitutional amendment, tax increases require voter approval.

On Wednesday, the bill died in the House Finance Committee on a bi-partisan nine-to-two vote.  Five Democrats--Debbie Benefield (Arvada), Alice Borodkin (Denver), Mark Ferrandino (Denver), John Kefalas (Fort Collins) and Jeanne Labuda (Denver)--broke ranks to join the four minority Republican members to oppose the bill.  Only Representative Frangas and Representative Joel Judd (D-Denver), the Committee Chair, voted for the bill.

CACI Governmental Affairs Vice President Donnah Moody spoke against the HB-1341.  Here is an edited version of her prepared testimony:

CACI’s Board of Directors as well as our HealthCare Council oppose HB1341, and I’ve been asked to convey the opposition of the Colorado Restaurant Association.

We oppose this tax increase for the reasons you’ve already heard, but from a broader business standpoint as well.  Our state’s healthy business climate is very much influenced by the decisions you make here at the legislature.

While Colorado’s state taxes are competitive, Colorado’s local tax burden, according to a Legislative Council publication in 2005, was 12th highest in the nation.

The state’s businesses are impacted by the same economic factors that drive this body (the legislature) to seek out funding sources other than the General Fund.  Our companies struggle with a downturn in the economy, rising gas prices, and huge increases in the costs to provide health care to our employees.

Further burdens on the backs of businesses in the state will make them less competitive against neighboring states with a lower tax burden and either force additional costs of doing business to be passed through to the consumer or cause businesses to close, making the state’s economy even less stable and hurting the very people that this bill is attempting to help.

The beer and alcohol industry contributes greatly to Colorado’s economy.  As you’ve heard, Colorado has two local brewers as well as a large number of microbrewers who pay millions of dollars, not only in sales and use taxes but property, business personal property, excise, payroll, unemployment and numerous other taxes, in addition to the downstream impact to restaurants and liquor stores.

This proposed measure sets a bad precedent in targeting one sector of the state’s businesses, and there is no “nexus” between those paying the increased taxes and how those funds will be used.

While the goal of finding additional funds for health care is worthy, 60 percent of those Coloradans who currently have health-care benefits receive them through employer-based programs.  We believe strongly that the responsible way to restore funding for health care or any other state program is not by targeting a specific industry and requiring that industry to pay the bill.

See the 9news article which quotes Donnah Moody:

http://www.9news.com/news/local/article.aspx?storyid=89238

House Committee Kills EITC Bill that Would Have Cost Unemployment Trust Fund

On Wednesday, the House Finance Committee killed HB-1362, which would have reinstated funding for an earned income tax credit for individuals eligible for Temporary Assistance to Needy Families (TANF) funds.  CACI opposed the bill.

The bill, sponsored by Representative John Kefalas (D-Ft. Collins) died on bipartisan 7-4 vote.

Three Democrats—Joel Judd (D-Denver), who is the Committee’s chair, Debbie Benefield (D-Arvada) and Jeanne Labuda (D-Denver)--voting “no” along with Republicans Doug Bruce (Colorado Springs), Jim Kerr (Littleton), Kent Lambert (Colorado Springs), and Kevin Lundberg (Berthoud). 

CACI opposed the bill because it would have transferred more than $11 million in revenues that would otherwise have been dedicated to the Unemployment Insurance Compensation Fund.  The diversion of funds would have eroded the solvency of the fund and likely increased unemployment surcharge taxes to employers and reduced the amount of dollars needed to cover unemployment compensation obligations.

CACI Governmental Affairs Director Loren Rachel Furman testified on behalf of CACI against HB-1362.  Here is an edited version of her prepared testimony:

CACI opposes HB-1362 because we feel strongly against a transfer of over $11 million from the unemployment insurance surcharge tax to fund this bill.  Those dollars would normally be dedicated to the Unemployment Compensation Fund, and the intent of the Fund is to assist people who are seeking re-employment.  Often these are individuals who lose their jobs through no fault of their own. 

An impact of over $11 million will reduce the funds needed for critical unemployment compensation obligations and could cause an increase in the surcharge tax that employers are required to pay.   

An article in The Rocky Mountain News this past Saturday showed that Colorado’s unemployment rate has increased to 4.4% in February.  This is its highest level in over a year.  Why would we want to risk using funds from the UI Fund when there are individuals who are currently unemployed and need those monies?

I also want to emphasize that the Federal EITC program is available to low to mid-income families and offers even higher income tax credits than what is provided in this bill. 

According to research by the National Conference of State Legislatures, almost 20 percent of eligible individuals and families nationally did not claim the Federal EITC.  In 2005, only 15 percent of eligible Colorado taxpayers claimed the Federal EITC.  This is because taxpayers are likely not fully informed about the program.

We believe that State funds should not be drained to support this legislation when programs currently exist to provide income-tax relief.

In response to questioning, Loren clarified that CACI did not support any of the 2002 JBC bills that transferred millions from the UI Fund to balance the budget. 

House Committee Kills Bill, Opposed by CACI, to Greatly Increase the Scope of State Regulation of Mining

On Wednesday, the House Agriculture, Livestock and Natural Resources Committee killed HB-1165, which would have: 

• Imposed duplicative requirements on mining operations to prevent and mitigate significant adverse environmental impacts on air, water, soil or biological resource and to protect the public health, safety and welfare, including wildlife resources.

• Allowed the state to deny mining permits, even if the applicant had complied with all requirements.

• Greatly expanded the authority of local governments to exercise the same powers as the State of Colorado in the regulation of mining operations, adding 64 additional layers of oversight to an industry that is appropriately regulated at the state and federal levels.

These requirements are already addressed in state law, and the duplication is designed to make the already rigorous process of applying for and renewing mining permits even more difficult with the ultimate goal being to stop mining altogether in Colorado.  

In the House, the primary sponsors were Representative Randy Fischer (D-Fort Collins) and Representative John Kefalas (D-Fort Collins).

CACI worked with the Colorado Mining Association, a CACI member, to inform the Committee of the economic and industry impacts of the proposed bill.  On March 19th, Chris Neuman, Of-Counsel with CACI-member Greenburg Traurig, testified before the committee in opposition to the bill on behalf of CACI.  The Committee had delayed action until Wednesday.

Controversial Single-Sales Factor Bill Introduced

The so-called single-sales factor bill was introduced in the House on March 28th.  HB-1380, is sponsored by Representative Cheri Jahn (D-Wheat Ridge) and Senator Brandon Shaffer (D-Boulder).  

The CACI Board of Directors adopted a neutral position on the single-sales factor bill, which is part of the Governor’s economic development package.  CACI’s Tax Council has worked with the Administration for months to address member concerns and, while some of the major issues in the bill have been addressed, others remain and a number of CACI members will likely oppose the bill. 

The bill can be downloaded from the CACI Web site:

www.COchamber.com

For More Information on Legislation . . .

CACI members with questions about legislation that CACI opposes or supports should contact Chuck Berry, CACI President, at 303.866.9652 or e-mail him at: cberry@COchamber.com

Questions pertaining to health-care bills should be directed to Ralph Pollock, Chair of the CACI HealthCare Council, at 303.866.9657 or via e-mail at:

ralph@apaccess.com