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Colorado House takes a second look at ag tax breaks

Nate Miller
Greeley, Colo.

Republican Rep. Jerry Sonnenberg thinks it’s a bad idea to make farmers pay sales tax on things they buy to run their business, such as veterinary supplies or pesticides.

“IBM doesn’t have to pay that sales tax on motherboards, doesn’t have to pay the sales tax on hard drives when they put a computer together, but now agriculture is being unfairly taxed when it tries to put food on your table,” said the Sterling farmer and rancher.

Last year, legislators removed a roughly decade-old sales tax exemption on agricultural products as part of a budget-balancing effort to increase revenue. The state also removed 11 other tax exemptions in what opponents dubbed the “dirty dozen.” This year, Republicans hope to reinstate at least some of those tax exemptions. Sonnenberg’s legislation, House Bill 1005, will have a committee hearing today in the Agriculture, Livestock, & Natural Resources Committee. If the bill were ultimately to become law, it would undo House Bill 1195 from last year, which removed the tax exemption on agricultural products through 2013.

Rep. Mark Ferrandino, D-Denver, who sponsored H.B. 1195, said he he’s not opposed to revisiting some decisions made last year, but with the state facing a more than $1 billion budget shortfall, it’s important to know how the lost revenue would be made up.

“As we were trying to balance the budget last year, we tried to take a very balanced approach,” he said. “That was what we decided we needed to do to protect K-12 education from an additional $140 million in cuts. We’ve seen some bills come up this year that would repeal some of those bills that we did last year. The question I have is, where are the offsets?”

The fiscal note for H.B. 1005, which offers a nonpartisan assessment of the bill’s impact on the budget, was released Friday. It estimates state general fund revenue would be reduced by $1.3 million this fiscal year if the bill were to become law by March 1, and $3.7 million each year for the remaining two years.

Ferrandino, who spoke before the fiscal note was released, said the revenue is important.

“I know this impacts farmers and people in the agricultural community,” he said. “It has an impact. So do cuts to K-12. So do cuts to higher education. When we tried to balance the budget, we tried to figure out a balanced approach – that everyone shared in the sacrifices that had to happen to balance the budget.”

Sonnenberg said the estimates don’t tell the whole story because they don’t take into account the impact of lost economic activity when farmers buy the products out of state in an effort to keep taxes from cutting into their profit margin.

“The problem we’re finding is that those are all phantom numbers,” he said, also speaking before the release of the fiscal note. “My biggest concern is not the loss of sales tax which shows up in the fiscal note, but the loss of economic activity in our state because of other companies coming into Colorado and selling their products based on not having to charge that sales tax.”


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