We need your help. On Friday, we wrote you about legislation that we knew was in the works to roll back the tax relief that is helping to keep many Coloradans employed. Thank you to those of you who took action and wrote your legislator to share your concerns.
Now, House Bill 1420 has been introduced and it’s extremely concerning. This session is moving fast and we can’t lose time. Please contact your legislator immediately to urge them to vote no. If you already sent letters, please do so again. We have a very short window to share our feedback and stop this bill from moving forward.
As we told you Friday, this legislation will hurt Colorado employers of every size, including sole proprietors and small businesses. But what’s important to note is that this negatively impacts employees – hard-working Coloradans. Just when employers need relief most, the bill complicates Colorado’s tax laws and drives up the cost of doing business in Colorado by eliminating tax cuts in the CARES Act and the Tax Cuts and Jobs Act of 2017. This will slow the economic recovery for Colorado, particularly the thousands who are searching for work today. Read our testimony in front of the House Finance Committee on Tuesday.
It makes no sense to close a budget gap by slowing the very engine that puts Coloradans to work and in return generates tax revenue. But, that is exactly what lawmakers are doing with this legislation.
Here’s what we know about House Bill 1420:
- It removes the 2017 deduction for pass-through, impacting nearly every small business in the state of Colorado, including sole proprietors. The deduction was implemented to ensure more parity between corporate tax rates and those for small businesses. Many sole proprietors, S corps and LLCs have pass-through income, meaning sole proprietors and small business owners pay personal taxes based on their business earnings. Changes like these in business tax credits hurt them the most.
- It caps net operating loss deductions, discouraging innovation and making Colorado less attractive for startup businesses.
- It drives up prices for consumers by removing sales tax exemptions on the supplies needed for manufacturing goods.
- It offsets the benefits of other state assistance being proposed this legislative session. Just as the CLIMBER Act was introduced to increase available funds for businesses, the legislature wants to simultaneously charge businesses more. This only creates greater uncertainty and discourages investment when we need it the most.
- It is being sold by sponsors as a way to dedicate funding to education over the next four years. But the bulk of the funding goes to the general fund, where lawmakers can use the money as they’d like. Less than half – $750 million – will go to education. Then after four years, none of the revenue is committed to education.
- It comes with a cost. To eliminate those tax breaks from our tax system, the Colorado Department of Revenue anticipates it would have to spend $4 million a year for the next four years to hire 45 full-time staff.
- It repeals the tax breaks permanently. When legislators repealed tax breaks during the Great Recession in 2010, the repeal was temporary. However, House Bill 1420 repeals many tax breaks permanently.
The sponsors of the legislation, Reps. Matt Gray and Emily Sirota and Sens. Chris Hansen and Dominick Moreno, say the bill would protect funding for education, infrastructure and critical services, when, in reality, it’s a short-sighted solution that risks hurting our state budget in the long run. History has shown us that our state budget is largest when the economy is strong and unemployment is low – just think back to the last two or three years. If we want to solve our budget challenges, we have to get the economy back on track.
The sponsors also say this will balance our tax system and bring necessary relief to Colorado’s working families. But, the bill will remove the tax relief that small businesses need to hire or retain employees, and it will make Colorado less attractive to employers who are considering bringing jobs here, delaying our economic recovery. We need to focus on getting the more than 517,000 people who have filed for unemployment back to work. That means not putting roadblocks in front of the businesses trying to hire them.
Contact your legislator now to urge them to vote no on House Bill 1420. It puts Coloradans’ jobs at risk, slows economic recovery and hurts small businesses.
Kelly Brough is the president and CEO of the Denver Metro Chamber.