Monday the state House passed a bill to exempt all business equipment purchased in the next two years from Colorados business personal property tax. The logic behind it rests squarely on the twin principles of wishful thinking and magical accounting. The Senate should kill it.
It probably will. This scheme, House Bill 1141, squeaked through the Republican-controlled House 34-31 - with state Reps. J. Paul Brown, R-Ignacio, and Don Coram, R-Montrose voting with the majority. In the Democratic-majority Senate it should have a tougher time.
The plausible-sounding idea behind HB 1141 is to stimulate Colorados economy by providing a tax incentive for businesses to buy new equipment to expand or upgrade their facilities. Presumably, the thinking is this would then translate into more jobs, more sales tax revenue and a better economic environment.
And it might. Then again the bills fiscal impact statement, prepared by the Legislative Council staff, points out that any such effects would be reduced to the extent that saving realized by businesses are spent outside Colorado and reduced spending by local governments reduces economic activity in their communities.
In other words, a personal-property tax might help the economy. Or, it might not do much.
What is more, the ratio of the assessed valuation of residential property to that of nonresidential property is fixed in Colorados Constitution by the Gallagher Amendment. With that, a cut in business personal property tax could further stress local government by lowering residential tax revenue.
We might all enjoy a property tax cut, but any such action should be done through an honest and open discussion - not as an unheralded side effect.
The obvious and most drastic result of any state tax cut would be to further reduce funds available for K-12 education. With education the single biggest component of state spending, that has a certain mathematical inevitability to it. The authors of HB 1141 got around that, apparently by assuming magical powers.
The fiscal impact statement estimates that the proposed tax exemption would cut school revenue by $37.5 million in fiscal year 2012-13 and by $76.3 million in fiscal year 2014-15.
So, HB 1141 simply says that much more money is hereby appropriated, out of any moneys in the general fund not otherwise appropriated, to the department of education in those years to finance the decrease in the local share of the total program for kindergarten through twelfth grade public school education.
Presto! Problem solved.
The only glitch is that in backfilling K-12 education from the general fund, HB 1141 simply assumes the existence of more than $113 million not now in evidence. It does not say where that money might come from and does not explain what happens if it never materializes. There would, in all probability, be no choice but to let schools take the hit.
It is, of course, unlikely to come to that. HB 1141 will almost certainly die in the state Senate. But then that might be the real point to this - to get Democrats on the record voting against a tax cut.
But there are easier ways to accomplish that. This is a cynical and dangerous way to score a political point.
