Fri March 4, 2011

Democrats Eye Back Taxes to Fill Budget Gap

Lawmakers want to entice people to pay their back taxes to help fill part of the state's budget shortfall. A Democrat-backed tax amnesty bill would waive penalties and fines if people come forward and pay up. But while that idea is popular on both sides of the aisle, another provision in the bill isn't.

Senator Pat Steadman (D-Denver) has a message for the public.

"Come forward, report for duty, come clean, pay your  taxes, the state of Colorado needs the money," he says. 

Steadman's Senate Bill 184 would give tax payers a two month grace period  during the months of August and September to avoid fees, and cut the  penalties in half.  He hopes the measure will help backfill education

If it passes, the Colorado Department of Revenue estimates the measure would bring in any where between 5 and 15 million dollars. But Department spokesman Mark Couch says the bill wouldn't apply to people the
state is already trying to collect taxes from.

"The amnesty includes only taxes that have not been identified  as due to the state," Couch says. "Most of the time it would be people who are trying to avoid paying taxes, it's not usually innocent mistakes that would fall into this category." 

Couch says these are taxes that might otherwise never get paid, because a small percentage of unpaid taxes fly under the radar.

The bill is expected to get its first hearing in the Senate Finance Committee soon, where at least one Republican plans to vote for it.

"Hopefully we can get some people's consciences to work for  them, and to pay their taxes," says Senator Keith King (R-Colorado Springs).   

King and many Republicans voted for a similar bill passed eight years ago during the last recession.

But there's a separate and new provision in this year's version that may make this version tougher to pass.  It would require the state to examine how tax credits and  sales tax exemptions benefit people from different income levels.

Co-sponsor Rep. Mark Ferrandino (D-Denver) who like Steadman sits on the joint budget committee,
says the goal is to understand the loopholes in the tax code, who it benefits and what it costs.  

"It's important that we increase accountability and transparency in our tax system," Ferrandino says.  

 The Department of Revenue would be charged with producing the annual report, and spokesman Mark Couch, says the department doesn't have the staff, money or data to do it. For instance, Couch says, for certain sales tax exemptions, it's nearly impossible to calculate who benefits.       

"When you go to the grocery store and you buy groceries you get a sales tax exemption regardless of whether you're poor or wealthy," Couch says.  "The grocery store doesn't ask you what your income level is, so the information is not reported to the state. " 

To that end, Senator Greg Brophy (R-Wray) plans to sponsor an amendment to get rid of that reporting requirement. Wray says Democrats  are using it as a political move to try and force Republicans to get on  board with eliminating sales tax exemptions and credits, instead of making budget cuts.  

"They're the guys who took away the sales tax exemptions last  year, I don't know if they're after the sales tax exemption on food  too, or materials use in the manufacturing process," Brophy says. 

And while Democrats have never talked about eliminating the sales tax exemption for food; Democratic Senator Michael Johnston of Denver says that doesn't mean the roughly $ 2 billion in tax exemptions are all
necessary, especially when  Colorado is more than a billion dollars in the red.

"A lot of people on both sides of the aisle are calling for  lets be transparent about where we're spending money and how effective  that is," Johnston says. "It means we should look at every department closely, every tax  exemption closely."

The bill’s reporting component would be similar to a measure that already died in the Republican controlled house earlier this session.