By Ali Mickelson
CFI Director of Tax and Legislative Policy
The 2017 legislative session has begun and there has already been a revival of many ideas that we have seen in the past. One such idea is an expansion of the exemption from the business personal property tax. HB17-1063 and SB17-009 both mirror bills CFI has opposed in the past. They increase the exemption from business personal property tax from its current amount $7,300.
As one business lobbyist pointed out in a hearing for these bills, the “play” featuring the business personal property tax debate has been put on every year, it’s just the cast of characters that has changed. CFI may not have been in the original cast, but we have certainly landed a recurring role.
And, spoiler alert, this year’s production will end the same way previous ones have, because our stance hasn’t changed.
The business personal property tax is paid by companies that own personal property, including equipment, machinery, pipelines, wells and furniture. It is an inequitable tax that is largely paid by larger, capital-intensive businesses.
However, this tax, like other property taxes, goes to fund local schools and governments. In some rural counties in Colorado, the BPPT provides more than half of the local funding. So when we talk about reducing the amount of business personal property tax paid, we are really talking about reducing the amount of money available for mostly rural schools, fire districts, water districts, cities and counties.
Because of TABOR, we can’t simply cut the business personal property tax and then swap it out with another tax to raise the same amount of revenue.
As was also pointed out in a committee hearing, the reduction in property taxes for schools will require additional state funding to offset the impact of the local funding reduction. This backfill takes money out of a budget that is already out of balance and facing cuts in a variety of areas, including K-12 education.
Anyone who argues that there’s no harm done by cutting the BPPT because rural schools would simply have their budgets backfilled by the state needs to remember the words of Sen. Fred Thompson, himself also a noted thespian, “They say they’re not going to take any water out of your side of the bucket, just the other side of the bucket!”
Also, while there is no question that the BPPT impacts business’s bottom line, reducing revenue to state and local governments also negatively impacts small business. If our legislators continue to chip away at our revenue system, small business, especially those located in rural communities, will no longer have funding for the roads that they drive on and use to transport their products, for the schools that create the next business leaders, employees and consumers, or for the myriad of other services that businesses depend on to operate.
The reality is nearly everyone agrees that the BPPT isn’t ideal, but they also agree that we shouldn’t strip funding from rural schools and roads. Deciding between these two options is exactly what is wrong with our current tax structure. There is no balance when we have to decide between supporting small business or supporting schools.
That is why we believe that we can’t look at the BPPT in a silo — it must be included as part of a larger discussion about how we want to fund our public investments. Colorado needs to consider comprehensive tax reform.
Without taking a complete look at our revenue and tax system in Colorado, we will continue to stage the same play year after year, saying the same lines each time. It is time we stop with business as usual when evaluating BPPT and start taking a new, comprehensive look at how we fund our communities to ensure they thrive.
The current show must not go on.