Tax-Free Colorado legislation forthcoming

Kelly Sloan, The Business Times

A measure designed to promote development in Mesa County and other parts of Colorado deemed economically distressed is expected to soon be introduced in the State Legislature.

The so-called Tax-Free Colorado initiative, which already has been touted by several Mesa County officials and business leaders, would be based on a similar program instituted in New York establishing zones in which qualifying businesses would be exempt from state taxes and fees.

“Our local and regional economies are sluggish. Clearly, we need a spark to get things moving forward,” said Tim Foster, president of Colorado Mesa University and a proponent of the Tax-Free Colorado concept.

If enacted by the state legislature, a pilot program will identify economically distressed areas as measured by a number of factors, including per capita income and gross domestic product growth at least 20 percent below state average, unemployment 20 percent higher than the state average, a net loss in the workforce within the past three years and a disproportionately high reliance on public assistance.

These areas would be designated as tax-free zones. Within the zones, qualifying new and existing businesses would be exempt from all state taxes — including corporate income, property and sales tax and related business fees — for up to 10 years. In addition, new employees of the businesses would be exempt from state income tax for the same period.

The program would focus on expanding high-tech manufacturing. Qualifying businesses would include those involved in technology and research, including the aviation, bio-tech and medical device sectors. Such service-oriented businesses as those in retail and hospitality wouldn’t qualify.

Qualifying businesses couldn’t operate in direct competition with existing businesses in other parts of the state. Backers say the goal is to bring new business to distressed areas of Colorado, not steal them away from other areas in the state.

“The concept of Tax-Free Colorado is intended to attract businesses to Colorado that are not found anywhere in the state,” Foster said.

Tax-exempt jobs must constitute net new jobs, meaning full-time permanent jobs new to Colorado, rather than jobs filled by employees transferred from other areas of the state.

The concept also involves universities and colleges by requiring qualifying businesses to align with the research and academic program goals of local higher education institutions. In addition, local universities and colleges would vet the requirements for qualifying businesses.

“CMU would be a facilitator in terms of helping determine if our community meets the criteria and whether a business also meets the standards,” Foster said.

State Sen. Ray Scott, a Republican from Grand Junction, said he supports the Tax-Free Colorado concept.

“We cannot legislate jobs into existence. But we can put together an environment to bring new businesses to distressed areas of the state,” Scott said.

The concept also has drawn some criticism, mainly from Democratic lawmakers, including State Sen. Rollie Heath, D-Boulder, concerned with the potential loss of tax revenue that could in turn affect public funding of capital projects, education and human services programs.

Supporters counter the economic growth generated by the program will offset any lost revenue as new employees will be paying sales taxes on their own purchases.

Other critics assert the plan amounts to the state government picking winners and losers.

Scott dismissed that charge. “Nothing from nothing is still nothing, and nothing is what we have now. If we can do something to add to the local economy — without using tax dollars to simply subsidize some artificial pet project — how is that a bad thing?”