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Tax slackers, take heart. A plan to waive late fees and interest on overdue Colorado taxes has cleared its first hurdle and appears to have broad support in the Legislature.
But Democrats pushing to tack on new reviews of who gets tax breaks face an uphill battle.
The Democratic Senate Finance Committee approved the temporary tax amnesty Thursday. The measure sets up a two-month period this fall in which people who owe taxes to the state could pay up without facing interest, fees or fines. Analysts say offering the amnesty could prompt debtors to pay some $12 million.
Tax amnesties are common government schemes to raise cash in a downturn. Colorado's last tax amnesty was in 2003.
"It's a no-brainer," said Todd Gardner of the business software maker SAP. Gardner testified in favor of the amnesty and said government tax amnesties have little downside as long as they're not done so often that tax scofflaws simply wait until the next amnesty hits to pay their taxes.
"They're a very strong way to bring revenue in without raising taxes," Gardner said of amnesties.
But three Republicans opposed the bill -- not because of the amnesty, but because a portion of the bill attempts to resurrect a Democratic proposal to review who gets tax breaks.
Democrats tried and failed to get the proposal through the GOP House earlier this session. By tacking the idea onto a tax amnesty expected to win support, Republicans complain, the Democrats are simply trying to slide through a rejected idea.
"These are two distinctly separate discussions," said Republican Sen. Mark Scheffel of Parker.
Other Republicans predicted the tax-break-tracking will simply be removed again by the House.
Democrats insist that the GOP should take a new look at the proposal to track where tax breaks go. The bill's sponsor, Denver Democratic Sen. Pat Steadman, said Colorado does a poor job finding out whether tax breaks fulfill their intended purpose.
"To me, this is a lack of transparency ... that we should do something about," he said.
The nonpartisan Colorado Fiscal Policy Institute, which favors the proposal, estimates that Colorado forgoes some $2.2 billion a year through sales tax exemptions and income tax credits.
"Up until this point, that money has been largely unaccounted for and unevaluated," said Ali Mickelson, tax policy analyst for the institute.
However, Republicans wondered whether Colorado's tax collectors have enough staff and expertise to review tax exemptions.
"Are you guys even capable of doing that?" Brophy asked employees of the state Department of Revenue.
Mark Couch, legislative liaison for the department, conceded it would be a stretch, especially tracking who gets sales tax exemptions and to what extent sales tax exemptions encourage people to buy certain things.
"It would rely on a great deal of assumption to do any kind of this analysis on sales tax exemptions," Couch said.
The measure faces more tests in the Senate before heading to the House. Steadman pointed out that more than two dozen states already track tax breaks. He argued that Colorado would be smart to join them, especially in tough economic times.
"We didn't dream this up and try to create something impossible," Steadman said.