Date: 11/12/2009
Final
Presentation on Revenue Structure
COMMITTEE ON JOINT FINANCE
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10:20 AM -- Presentation on Revenue Structure
Mr. Ron Kirk, LCS, began his presentation about Colorado's revenue structure. Members received a handout that included information about tax credits, rebates, exemptions, and historical revenue data (Attachment C). Mr. Kirk provided a history of the state of Colorado's major tax policy changes and how these changes have impacted state revenue.
Mr. Kirk began by providing a breakdown of General Fund revenue sources, explaining that 95 percent of the state's General Fund revenue is comprised of state income taxes and state sales and use taxes. The income tax component, he explained, comprises about 65 percent, both individual and corporate, and the sales and use tax component is approximately 35 percent. In the mid-1970s, the balance between individual income and sales was about equal, with income taxes comprising about 39 percent of the General Fund and sales and use taxes comprising about 37 percent. During this period, the state was running budget surpluses, and as result, a number of state sales and use tax exemptions were enacted. During the same period, he explained the state also adopted a number of state income tax credits and rebates. These changes helped to reduce the budget surpluses.
Mr. Kirk continued providing a history of the state income tax and sales and use tax. In the 1980s, the state experienced a recession and the state rescinded many of the state income tax credits to generate more revenue. However, the state did not repeal or suspend any of the state sales and use tax exemptions adopted in the 1970s. There were other changes, including the major tax policy reform in 1986, which changed the state income tax from a graduated rate to a flat rate of 5 percent.
Mr. Kirk stated the effect of this change was the broadening of the state income tax base for purposes of collecting income. Because the income tax reforms were piggybacked on the federal income tax, when the federal base expanded so did the state's tax base. In addition, the sales tax base narrowed as consumers began spending more on services rather than goods. In a nutshell, these major changes have made Colorado more reliant on state individual income tax revenue and less reliant on revenue from sales taxes.
10:21 AM
Mr. Kirk continued his presentation by explaining the tax credits tables included in Attachment C. The document includes a list of income tax credits and rebates, and state sales and use tax exemptions for the most recent year when data is available, which is FY 2008-09. The most recent fiscal year data shows that $261 million in individual income tax credits were claimed in Colorado, which declined over the previous year due to the economy. Mr. Kirk also explained the corporate income tax credits and rebates claimed, which was estimated at $48 million. Likewise, the impact of state sales and use tax exemptions was estimated at about $1.8 billion. He continued discussing these exemptions.
10:24 AM
Mr. Kirk also explained the historical data included about individual income, corporate income, and state sales and use revenue. He concluded with a discussion about the corporate income tax.