Colorado Capitol Report

Amendment 73: New Study Questions Proposal to Increase State Income Taxes by $1.6 Billion for P-12 Education

Amendment 73: New Study Questions Proposal to Increase State Income Taxes by $1.6 Billion for P-12 Education

Initiative 93 Becomes Amendment 73

Initiative 93, the proposed ballot measure to progressively increase state income taxes by $1.6 billion to fund P-12 education, has been labeled Amendment 73 by the Colorado Secretary of State’s Office.

Amendment 73’s ballot title and submission clause, the wording that will appear on the ballot, has been set by the Ballot Title Setting Board.  Because Amendment 73 would amend the Colorado Constitution, a 55 percent vote is required to pass (see below) it.

REMI Partnership Report

A new study from the REMI Partnership questions the objective of Amendment 73 in raising income taxes by $1.6 billion to provide new funding for P-12 education by:

  • Progressively increasing the income tax on individuals and businesses filing via individuals’ Social Security numbers that earn more than $150,000 per year;
  • Increasing the income tax on corporations; and
  • Altering the residential and commercial property tax system.

Education Outcomes

The report makes the following points about the “promise” of Amendment 74’s earmarking of new tax revenue to P-12 education:

“There is no evidence of any performance increase in terms of graduation rates that can be determined from increased spending alone.  The measure would increase education spending by a minimum of $1.1 billion.  Recent spending patterns indicate these is no guarantee that new money will reach classrooms.  Rising PERA costs now take over $450 million from school districts to pay down unfunded liability.  Recent years ratio of new non-teacher staff to teachers has been over 3 to 1.”

Economic Impact

The REMI report predicts a major, negative impact on the Colorado economy:

  • Average annual loss of 11,400 private-sector jobs annually for the next 20 years.
  • Annual decrease of state gross domestic product (GDP) would be $850 million.
  • Disposable personal income will drop by $1.8 billion yearly.

Tax Impact

Here’s the Legislative Council’s initial analysis of the measure:

            Income tax.  The measure creates an exception to the current law requirement that any new income tax law change require taxable net income to be taxed at a single rate.  Specifically, the measure allows multiple tax rates to apply to individuals, trusts, estates, and corporations if the tax increase is approved by voters for the funding of P-12 public education.  The measure then increases state personal income tax rates on federal taxable income by the following graduated rates, beginning in tax year 2019:

  • 0.37 percent for income between $150,000 and $200,000;
  • 1.37 percent for income between $200,000 and $300,000;
  • 2.37 percent for income between $300,000 and $500,000; and
  • 3.62 percent for income above $500,000.

The measure also increases the state corporate income tax rate for domestic C corporations and foreign C corporations doing business in Colorado by 1.37 percent beginning in tax year 2019.  All revenue from this individual and corporate income tax increase is deposited in the Quality Public Education Fund and may be retained and spent without further voter approval.

As noted, Amendment 73 would increase the corporate income-tax rate from the current 4.63% by an additional 1.37% for C-corporations, both domestic and foreign.  That’s a 30% increase in the corporate income tax rate!

In the August 9, 2013, issue of The Colorado Capitol Report, the Colorado Chamber examined which businesses file under the individual tax return:

. . . a business owner who operates as “sole proprietorship” or two or more business owners who operate as “general partnership,” “limited partnership,” “limited liability company (LLCs)” and “S Corporations” file their tax returns as individuals.

In addition, “limited liability partnerships” and “limited liability limited partnerships” will be taxed as partnerships unless they elect to be taxed as corporations.  For more information on these types of businesses, read The Colorado Business Resource Guide.”

The REMI Partnership study makes the following points:

  1. First, the proposal would increase taxes by $1.6 billion, which would include a $1.4 billion increase in personal income taxes.  This would be a 20 percent increase in tax revenue.
  2. The top marginal rate would leap from 37th to 8th among states with income taxes.  This would be an 80 percent increase from the existing tax rate.
  3. The corporate income tax rate would increase by 30 percent, which would raise Colorado from 43rd among states with a corporate income tax to 31st.

The REMI Partnership report also examines the more complicated question of what Amendment 74 would do to the state’s property tax system.  The study says it would set the residential property tax rate at 7 percent, which is an increase over the projected rate of 6.1 percent.  It would decrease the assessment rate for most non-residential property to 24 percent.  “This likely means that districts such as water, fire and police will face much lower revenue as the assessment rate falls while the school district rate remains constant.”

New Rules for Constitutional Ballot Initiatives

This is the first election under which new rules govern citizen initiatives to amend the Colorado Constitution.  A successful ballot amendment, Amendment 71, called “Raise the Bar” in 2016 sought to make it more difficult for advocates to submit ballot measures.

The amendment requires that signatures must be obtained from at least two percent of the registered voters in each of the 35 state senate districts.  (This requirement was ruled unconstitutional earlier this year by a Federal court judge, but the 10th Circuit Court of Appeals decided to allow it to remain in effect while the lawsuit remains alive.)

Ballot measures that would amend the Constitution now need a 55 percent voter approval, up from a majority vote.

Legislative Council’s Bluebook Analysis

The Legislative Council’s third and final draft analysis of Amendment 74 is now available.  The analysis will go into the legislature’s Bluebook.  The Bluebook will be mailed to all registered voters later this month after the final version of the Bluebook passes muster with the Legislative Council.

Advocates

The supporters of Amendment 73 call their effort  Great Schools, Thriving Communities, which is backed by, among others, the Colorado Education Association (CEA), a Chicago-based organization called Stand for Children and the Colorado Fiscal Institute, a liberal think tank.

As of September 4th, the initiative’s campaign committee, “Great Schools Thriving Communities” (Secretary of State Office ID # 20185033710) had raised just over $447,000.

More Information

For more information, read:

“SPONSORED: New study asks, is a $1.6 billion tax increase worth it?” by Tim Brown, Colorado Politics, September 13th.

“Elections Matter: Legislative and Governor’s Races Plus Potential Critical Ballot Measures Face Business Community,” Colorado Capitol Report, August 10th.

“Education Tax Increase Proposal Takes Dead Aim at Higher-Income Taxpayers, Corporations and Non-Corporate Businesses,” Colorado Capitol Report, July 27th.

Chamber Supports Employers, Testifies Against U.S. DOL Overtime Rule

Just two weeks ago, the U.S. Department of Labor (DOL) and the Small Business Administration (SBA) announced listening-only sessions in five cities – including one in Denver this morning.

Previously, the overtime rule was blocked by the courts, appealed to a higher court and blocked once again — specifically because the overtime threshold for salaried employees would more than double from $26,660 to roughly $50,000 today, and setting that specific dollar amount was outside scope of the DOL.  Today the DOL under the Trump Administration, in conjunction with the SBA, are looking at what the burdens of this proposed rule would like to Colorado’s employers.

Testimony from Leah Curtsinger, the Colorado Chamber’s Federal Policy Director is below:

“Our mission as Colorado Chamber of Commerce is to champion a healthy business climate, where the primary objective of the Chamber is to maintain and improve the cost of doing business in our state.  Along those lines, predictability is key to business success and sustainability.  I am here today, more than anything, to provide a backdrop for today’s more technical discussion and represent the Chamber’s members that are statewide, across industries and all sizes of employers.

With today’s hearing, we want you to hear loud and clear that this rule would actually hurt the very workers it was intended to help, while penalizing employers of all sizes.  All this without consideration for the economic diversity of Colorado, city to city, region to region, or for the big picture, state to state for the proposed overtime threshold.

Here in Colorado, that threshold disparity would especially be felt across along the Front Range, Western Slope & I-70 corridor based on the microcosms of our Colorado economy, let alone what that threshold means for coastal states vs. middle-America and a potential urban vs. rural state divide.

Looking at the overtime rule specifically – as previously proposed and then halted by successive courts – it would throw out decades of previous overtime standards.  Employee exemptions would also be put aside for drastic new changes to hourly, salaried and high-income standards.

For the previous overtime standard, “time and a half” pay was given for overtime when an hourly employee had worked any amount of time over the full time 40-hour work week.  Or, in the case of “exempted” salaried employees, those making $26,660 or less per year ($455/week) would qualify for overtime.

I repeat these standards for you today, and they are important to note, because while the hourly standard has not changed under the new rule, the new salary threshold has more than doubled.

Timekeepers: The Colorado Chamber will continue to voice its concerns that the Department of Labor’s overtime rule would negatively affect businesses with salaried managers, where those employees and employers will now be burdened unnecessarily as timekeepers.

By default, this rule would also require any company with salaried employees to invest time and money into some sort of time-tracking system that likely wasn’t needed or used prior to this rule.  Even if all employees were exempt and salaried, many would still need to invest in a system to ensure no individual employee fell below the DOL’s standard.

Work from Home:  This rule would seriously call into questions how and whether employers allow employees to work from home – since working remotely for salaried employees more typically involves a trust factor and mindset of working to project completion, rather than using a time clock.

  • It also calls into question: would answering a quick email from home require reporting 15 minutes of an employee’s time?  More? Less?  Does that response dock an employer an hour automatically?
  • Would employers have to pull back laptops, work phones, etc. to prevent employees from working more than 40 hours?

Job Markets: It is also worth noting that the employment market looks at hourly jobs differently than salaried positions, and this rule would virtually eliminate the opportunity for new graduates and young workers to attain salaried positions early on in their careers.

Promotions: Likewise, workers looking to receive promotions may not be able to work harder to gain recognition if an employer cannot afford to pay workers overtime, and thus the overtime rule could limit advancement opportunities as well.

To sum things Up: Why the Colorado Chamber Cares & Has Opposed This Rule:

The DOL’s salary threshold would more than double to $47,476 (or $50,044), meaning all currently-salaried employees making less than the threshold would likely be subject to overtime requirements regardless of previous exemptions  – where in many cases, this would make seasoned, salaried employees into hourly workers.

  • The DOL’s enjoined rule forces employers to change how employees are paid (hourly vs. salaried);
  • It would change how workers account for and complete work (clocking in vs. working to project completion or promotion); and in general,
  • Would change the structure of how employees work within a company (at desks vs. remotely).
  • Although some exemption were suggested/added, it could also potentially negatively affect nonprofits, charities, universities and academic institutions, municipalities and local governments, where employers are unable to increase revenues to cover increased labor costs.

While the Chamber does not have specific recommendations for what any future overtime exemption threshold should be, we believe the Department of Labor should reconsider the overtime rule as proposed.  At the very least, take into consideration the need for employers to have time to plan ahead and establish predictability.

We also ask that population centers and even population density be considered.  Should the rule move forward in any form, businesses need to have several years to plan for how they will structure employee pay, how they might utilize exempt vs. non-exempt employees, and therefore how they address employee payment plans.

This rule as previously proposed would place incredible burdens on all employers, and would hurt the very employees the rule was purported to help.

Thank you for your time and listening to the thoughts of the Colorado Chamber of Commerce and the views of our statewide member companies.

Statutes Creating the Public Utilities Commission Sunset Next Year

Colorado Chamber of Commerce members should be aware that the current laws that create the CO Public Utilities Commission (PUC) and its programs are scheduled to sunset on September 1, 2019, unless the General Assembly affirmatively re-enacts them through legislation.  The PUC oversees several different industries such as:  telecommunications; electric utilities; natural gas pipeline safety; rail and transit safety and transportation network companies.  If your company is regulated by the PUC then this sunset review process will be of interest to you.

Details on Sunset Review Process:

The Office of Policy, Research and Regulatory Reform (OFRRR) within the Colorado Department of Regulatory Affairs (DORA), is responsible for conducting the sunrise and sunset reviews for the state.  The OFRRR staff will be conducting the review of the PUC and the programs it oversees to determine if they serve the public interest, whether they should be continued or allowed to sunset, and, if they should be continued, what changes if any need to be made.  Here you will find a list of the statutory criteria statutory criteria used during a sunset review.

The OFRRR staff is also seeking input from interested parties and stakeholders including Colorado Chamber of Commerce, CACI, members.  Staff will develop their recommendations based on the input they receive which will then be presented to the Colorado General Assembly during the 2019 Legislative Session.  Legislation will be introduced by members of the General Assembly based on some or all of the recommendations.

Please contact Brian Tobias, Director, OFRRR at [email protected]  if you would like to provide input during the PUC sunset review process.

If you have general questions regarding this review process, please contact Loren Furman at [email protected] or at 303-866-9642.

Thank you!

Colorado Chamber to Meet Interior Secretary & EPA Administrator in Washington, DC

Small but mighty group of Colorado Chamber leaders headed to D.C. in one week

This group of business voices will be led by the Chamber’s Leah Curtsinger, Federal Policy Director, to provide an insider’s view of Capitol Hill, Congress and the White House – while advocating for Colorado’s most pressing business issues.

The Chamber is scheduled to meet with Colorado’s Congressional delegation, as well as:

  • Department of the Interior (DOI) Secretary Ryan Zinke
  • Environmental Protection Agency (EPA) Acting Administrator Andrew Wheeler
  • Deputy Assistant to the President & Deputy Director, Office of Public Liaison, Steve Munisteri
  • U.S. Trade Representative, Ambassador C.J. Mahoney
  • Chairman of the Senate Budget Committee, Sen. Mike Enzi
  • Senate Finance Committee Policy Director, Becky Cole
  • House Small Business Committee

→ As part of our DC conversations, the Colorado Chamber will be sharing the results of our “A Closer Look at Tariffs & Business Interactions” survey. 

If you have not responded yet, please take our 3-minute survey to share your company’s thoughts and experiences – good, bad or all-of-the-above – so we might communicate the most representative perspective of our member companies to our Members of Congress and the administration.

*** Please respond to our tariff survey by Monday, Sept. 17 @ noon! ***

Stay tuned for live updates, posts & tweets by following the @COChamber on Twitter and Facebook