CACI survey: Most Colorado businesses would delay expansion, cut pay if tax breaks are suspended - Denver Business Journal:

Monday, January 25, 2010, 1:46pm MST | Modified: Monday, January 25, 2010, 10:00pm
CACI survey: Most Colorado businesses would delay expansion, cut pay if tax breaks are suspended
Denver Business Journal - by Ed Sealover

Nearly three-quarters of Colorado businesses say they would delay planned expansions and more than half would cut worker pay and freeze hiring if proposed suspensions of 13 tax exemptions are signed into law, according to a survey released Monday by the Colorado Association of Commerce and Industry.

The CACI survey, conducted among the statewide business group’s 112 members, was released just two days before the House Appropriations Committee is scheduled to conduct the first hearings on the budget-balancing proposal.

And it came three days after three other business organizations, including the Denver Metro Chamber of Commerce, sent Gov. Bill Ritter a letter saying that they were concerned that approval of exemption cuts would lead to “job loss and stymied economic growth.”

It was not immediately apparent what effect the two memos would have on the exemption bills, which have been championed by Ritter and Democratic legislative leaders but so far haven’t encountered serious opposition from the business community.

Ritter called business groups in last week and said that he was proposing to speed up seven of the exemption suspensions from July 1 to March 1 in order to help close a $60 million shortfall in this fiscal year’s budget.

But the two efforts represent the largest evidence yet that leaders from a number of different types of businesses are beginning to mobilize against the efforts — a powerful coalition that has brought down proposed legislation in years past.

“All tax credits that are eliminated or suspended directly affect our profitability and will affect our ability to employ and provide benefits to our employees and eventually could eliminate our ability to stay in business,” wrote Kim Moravec, co-owner of ABC Die Cutting and Embossing of Denver, in response to the CACI survey.

The 13 targeted tax exemptions represent $131.8 million in the revenue that the state intends to apply toward an expected budget shortfall in the fiscal year that begins July 1. They range from a $48 million sales-tax exemption on energy used in the manufacturing process to a $1.5 million sales-tax exemption on agricultural compounds and bull semen.

CACI’s survey identified four of the 13 that are the most troubling to business. Those, in order of the percentage of respondents that said they would have the most critical impact on their operations, are:

• A sales-tax exemption on computer software bought anywhere other than a store;

• A three-year limit on the net operating loss carry-over to $250,000;

• The two-year suspension of the manufacturing energy usage exemption;

• A two-year limit on the corporate enterprise zone investment tax credit.

Marty Terek of Ball Corp. in Broomfield noted in the survey that his company could lose $750,000 a year through the energy exemption suspension and see a decrease in production of soft-drink containers, whose exemption also is on the chopping block. The two hits taken together could severely impact the company, he said.

“Colorado businesses want to keep their workers employed and then lay the foundation for creating additional jobs,” CACI President Chuck Berry said in a news release. “But the legislative proposals to raise taxes on business at this time will only frustrate our job creators in their efforts.”

Ritter press secretary Evan Dreyer responded that the administration has asked CACI and other business groups for alternative ideas for months on how to close a $1 billion gap in next year’s budget but has yet to hear any constructive ideas.

The only other option at this time is to cut K-12 education by some $125 instead of taking the money from tax exemptions — an idea that Ritter feels will do more long-term harm than suspending tax breaks, Dreyer said.

“We understand this will impact businesses. But we are asking everyone – including state agencies, government employees, K-12 schools, businesses and many others – to share the burden,” Dreyer said. “We also are making sure that the most important things – food, medicine and manufacturing parts – are still exempt from the state’s 2.9 percent sales tax.”

esealover@bizjournals.com