Tax-Free Colorado: An idea whose time has come

No one escapes the taxman completely, but “Tax-Free Colorado” is more than just a marketing slogan. It’s a device to lift up communities in the state displaying genuine, measurable signs of economic distress.

Here is how it would work:

It creates a tax-free environment for qualifying start-ups and expanding businesses. Qualifying businesses locating within an approved tax-free zone may operate for up to 10 years free of sales taxes, property taxes, business taxes, corporate taxes and franchise fees. Employees of these companies will pay no state income tax.  It also incorporates a relationship with academic institutions that will host these new businesses.

There are, however, strict rules. For starters, applying communities must meet certain criteria of economic non-performance, such as: (1) Per capita income 20 percent below the state average, (2) Growth of local GDP 20 percent below the state average over the preceding five-year period, (3) Unemployment 20 percent above the state average more than three years, (4) A net loss of workforce measured over three years, and (5) Disproportionately high rates of citizens on public assistance.

This immediately rules out much of the Front Range. Though should the economic rug ever be pulled out from under Boulder County, for example, the Tax-Free Colorado program would be available to them.

Next, the program excludes retail, restaurants, doctors offices, accounting firms, law firms, financial services, real estate brokers, utilities, etc. Successful applicants will actually need to make something: software developers, medical device manufacturers, advanced industry, aviation, food sciences/processing, machining, biotech and life sciences and other technology-related companies.

Businesses in the program cannot be in direct competition with other businesses in the state. This is tricky, though, because some companies, Apple and Google for example, choose to locate near each other because they are complementary, not directly competitive even though they offer products that compete. An oversight commission would make such a conflict/complement determination under Tax-Free Colorado.

Finally, and this may be the most important criterion of all, the companies in the program must bring “net new jobs” to the state. That means a job meeting the following requirements:

■ is new to the state;

■ has not been transferred from employment with another business located in this state;

■ is not filled by an individual employed within the state within the immediately preceding 60 months;

■ is either a full-time wage-paying job or equivalent to a full-time wage-paying; and

■ is filled for more than six months.

The “net new job” requirement is vital because it protects against the argument that this program will diminish the local tax base when companies are accepted into the program. Moreover, new workers to the community will buy homes, cars, groceries, etc. — on which they will pay taxes like the rest of us.

As a further protection, local governments must agree to become part of the program and forgo specified tax receipts for 10 years. There are no gotchas.

Businesses and industries seeking inclusion in the program must align with a college or university’s academic mission in a qualifying community. There are a number of benefits to this requirement. Not only will it potentially enhance the programming, faculty, research funding and capabilities of the college or university, but it’s a way to retain graduates that would otherwise leak to Denver or out of state. The potential for workforce training and experiential learning opportunities is enormous.

As an additional local control feature, four-year or two-year universities or colleges will establish their own program participation policies for interested businesses.

In the end, the rules and restrictions significantly narrow the number of businesses that can successfully enter the program. But the businesses that do qualify are the kinds of job-creating businesses that have spillover benefits. Some jobs create more jobs. Those are the ones we want to attract to the struggling communities of the state.

Tax-Free Colorado is no panacea. If I have learned one thing about economic development, it’s that there are no hail mary touchdown pass plays. It’s all about blocking and tackling – doing the little things to advance the ball down the field.

Tax-Free Colorado is a solid, wrap-up tackle. It’s one thing among many this community needs to reverse its sagging fortunes. Aside from the fact that the program is revenue-neutral in terms of costs to taxpayers, there are three significant benefits in my view:

1. It allows struggling communities to develop a better workforce, either through business attraction or retention of the performing graduates of our colleges and universities;

2. It will bring new businesses to these communities. When the economic pie grows, we all get a bigger slice. That’s the main purpose.

3. Finally, it’s a helluva marketing theme. Consider that General Motors brands vehicles around the name “Colorado.” Those of us who were not born in this state dreamed about someday living in Colorado. It’s easy to forget how lucky we are to live here. Now, combine the favored term “Colorado” with another set of favorite words: “tax-free.”

But, it’s just a play on the chalkboard until the Legislature laces up and gets in the game.

Jay Seaton is the publisher of The Daily Sentinel. Email .(JavaScript must be enabled to view this email address).


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Jay Seaton challenged Grand Junction to come up with ideas to improve our local economy in a recent editorial, which I applauded. Today he published his second installment with his own recommendations. There are two points I question: the requirement that a business not compete with any other business in the state and the benefit that individuals working for that company also get a 10 year tax holiday from state income taxes.

On the requirement that the business, which would get a 10 year tax holiday from all state taxes, including sales, property, and income, not compete with another business in the state my thought is that the federal policies supporting economic development require that federal dollars not be used to to MOVE a business from one state to another. They do not require the businesses to not be in competition with each other. While I see the logic in Seaton’s proposal—if a company is getting a complete tax holiday they have a competitive advantage in the state’s economy. But, I think Colorado might want to invest in a business that is going into a distressed area (Mesa County,) even if it competes with businesses in booming areas (Denver/Boulder,) especially if the market is a new, growing market with customers in other states or the world.

On the benefit to the individual employees of that company—wow, Seaton is really thinking outside the box! I can see how it would keep recent CMU graduates in town and at that job for the 10 years of a tax holiday. I just never considered that approach, and to my knowledge, which is imperfect even though I did work in the industry from 1995 until 2008, this has never been tried before.

The second installment of Jay Seaton’s optimistic economic development proposal (“Tax-Free Colorado:  An idea whose time has come”) illustrates the difficulties of formulating government policy to induce private enterprises to locate in economically struggling rural communities that “free-market” factors suggest should be avoided.

Contrary to Seaton’s assertion that “Tax-Free Colorado” is “more than just a marketing ploy” – it betrays some “snake oil” salesmanship by disingenuously implying that “Tax-Free” would apply to the entire state of Colorado, when it would actually be restricted to only some areas of rural Colorado and qualifying enclaves elsewhere in the state.

To achieve its laudable objectives, the proposal combines an ironic and contradictory mix of traditional “conservative values”: “no
taxes” accompanied by intricate “regulations”
– in effect, “choosing winners and losers” by manipulating the entrepreneurial incentives of the “free market” through highly restrictive qualification requirements.

Moreover, it remains uncertain whether Grand Junction and/or Mesa County would benefit from being “tax-free”, since that factor alone is not stymieing local economic growth.  Rather, as Grand Junction Economic Partnership’s (“GJEP”) Executive Director Kelly Flenniken told a multi-partisan group of informed citizens two-weeks ago—while tax “giveaways” are always a consideration in a prospect’s decision to locate to Grand Junction (or not)—the most frequently encountered “deal-breakers” are:  inadequate broadband capacity, the low quality of local K-12 education, and the unavailability of already-skilled employees.

Grand Junction’s ballot measure to legally override SB 05-152’s statutory restrictions on municipal involvement in tele-communications is a necessary prerequisite for eventually addressing the first obstacle.

The latter two require repeal/revision of TABOR to increase funding for K-12 education and raising Colorado’s severance tax to invest in technical and higher education—also “ideas whose time has come”. 

Therefore, the Sentinel should be strenuously advocating those “tax policy changes” rather than “tilting at windmills”.

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