Tax credits vs. spending cuts

The budget battle got under way heatedly in the Colorado Legislature last week, with finger-pointing and a clear divide between Democrats and Republicans over cutting tax credits that help businesses and others versus reductions in state spending.

Concerns about the tax credits are understandable. Some of the proposed cuts will significantly impede growth in outlying parts of the state, including western Colorado.

For instance, the governor’s plan to cut a three-year corporate enterprise zone investment tax credit could reduce investment in areas that need it most.

And a plan to scale back the state tax credit landowners receive for placing land in conservation easements could severely restrict the ability to obtain new conservation easements.

Also, a plan to eliminate a tax on software that companies purchase outside of retail outlets could hurt the ability of industry to remain technologically competitive.

However, much as we would like to say “no” to slashing tax credits that we believe are beneficial to the state and this region, it is myopic to say, “Do all your cutting on someone else’s programs.” With the state facing a $1.3 billion shortfall in the budget year that begins July 1, it’s clear all parts of the state and all sectors of the economy will have to share in the sacrifice.

Furthermore, cutting some of the tax exemptions makes sense. Is there any reason that soft drinks and candy – which are hardly nutritional necessities – should be exempt from the state sales tax as other food is?

Still, that doesn’t mean that reducing tax exemptions is the only way to reach the budget goal. And Ritter’s claim that if people don’t accept his proposals teachers will have to be laid off ignores the fact there are alternatives other than cutting more from education.

Republicans have pointed to Montana, where a Democratic governor has proposed a 5 percent across-the-board budget freeze.

Sen. Minority Leader Josh Penry, R-Grand Junction, is pushing a proposal to implement a more serious hiring freeze than the state implemented last year, as well as to consolidate administrative functions and scale back high public-sector salaries.

Others in the GOP have proposed commissions to eliminate waste and fraud and to seek ways to spin off some government functions to the private sector.

In the end, the budget solution will have to come from a mix of cutbacks in state spending and scaling back some tax exemptions. That will require compromise by members of both parties – not a “My way or the highway” attitude.


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