Challenges to “Dirty Dozen” tax increase bills likely to end up before the Colorado Supreme Court
After the Colorado Senate voted in favor of the “Dirty Dozen” tax increase bills under consideration by the Legislature on a mostly party-line vote Wednesday (following last Monday’s similar mostly party-line approval of the bills in the Colorado House), the legislative battle over the tax increases (er, “elimination of tax credits and exemptions“) is all but over.
However, as students of history know – a lost battle does not mean the end of the war. In fact,
The REAL story behind the “Dirty Dozen” tax increase proposals is their dubious (to put it charitably) constitutionality.
ALL of these bills are seeking to exploit an apparent loophole ripped into the Colorado Constitution by last year’s notorious “Mill Levy Tax Freeze” ruling (which didn’t only blindside voters to unconstitutionally increase property taxes, but further undermined TABOR) by the Colorado Supreme Court.
Under Article X, Section 20 of the Colorado Constitution (TABOR – the Taxpayer’s Bill of Rights) any tax increase or “tax policy change… resulting in a net revenue gain” REQUIRES prior approval by a vote of the people.
Despite an interpretation of part of last year’s notorious “Mill Levy Tax Freeze” ruling which in essence declared “open season” on the tax credits & exemptions now being eliminated by the “Dirty Dozen” tax increase bills, the requirement stands – YOUR rights are being violated by the Legislative majority, aided and abetted by the “Mullarkey Majority” on the Colorado Supreme Court.
However, even under the expansive interpretation of that ruling to give “cover” to these tax increases, many of the bills STILL do not pass constitutional muster; many of these bills WILL be challenged in court, and (at least with a new Colorado Supreme Court majority that actually believes in UPHOLDING the Colorado Constitution, instead of actively working to undermine it) these challenges have good prospects for success. As the Denver Post (Lawmakers predict court fights on ending tax breaks) notes:
“Business groups say several bills are likely to end up in court, including one [HB10-1190] that would remove the sales-tax exemption for energy – such as electricity, fuel and coal – used in the manufacturing process.”
“Critics said it would impose a new tax because the prohibition against taxing industrial-use energy is an “exclusion,” not an “exemption.” That is, when the state’s original sales-tax law was written in 1935, it specifically excluded energy used in the industrial process from taxation, so simply changing the statute is not enough, business groups say.
The measure would have to go before voters as a new tax increase under the Taxpayer’s Bill of Rights, known as TABOR.”
Other bills are on similarly shaky constitutional grounds.
A bill seeking to impose a tax on computer software downloads (House Bill 10-1192: Sales and Use Tax of Standardized Software (Pommer/Heath)) is also considered to be a “new” tax, since current law only imposes a tax on software packaged and sold on a physical medium such as a CD/disk:
Software industry officials said Colorado would be one of only 11 states with such a law, and imposing the sales tax would hit most businesses because companies large and small depend so much on software. [Ed. - and consumers! Most anti-virus software is bought and/or upgraded via downloads, for example].
Perhaps the most troubling bill on constitutional grounds (including not just violations of the Colorado Constitution, particularly the Taxpayer’s Bill of Rights, but also the U.S. Constitution’s 4th Amendment protection against unreasonable searches & seizures) is the bill imposing a tax on online purchases – House Bill 10-1193: Sales Tax Out of State Retailers (Pommer/Heath). As the Denver Post article further notes:
“And Colorado may be sailing into uncharted legal waters with a bill that would attempt to tax online sales from such out-of-state retailers as Amazon.com. The current version of the bill would require the online retailers to send out notices to Colorado purchasers that they owe the state use tax on their purchases, and it would fine the retailers if they don’t do it.
The hope is that retailers would find it less trouble to just collect the tax from purchasers and remit it to the state. But Brophy and others say Amazon.com and other companies will cite a U.S. Supreme Court decision that held online retailers are not responsible for collecting the tax.
No other state is attempting such a method to collect tax from online retailers.
[Senator Greg] Brophy [R-Wray] maintains that the only way the state could hope to enforce the tax is by obtaining detailed lists of purchases Coloradans made and invading their privacy.”
In fact, the state intends to do just that – as the bill contains provisions to subpoena online retailers to receive lists of purchases made by Colorado citizens. As several commentators have noted, the “Big Brother” Orwellian implications of this “Shift on Internet Tax Tactics“ are simply staggering in scope.
Finally, some of the “Dirty Dozen” bills, such as the “Candy Tax” and the “Doggy Bag Tax” are not only just plain silly, but would necessarily be so capricious and arbitrary in application and enforcement (imagine hordes of “Candy Police” and “Doggy Bag Inspectors” sniffing around stores and restaurants for violators and technical infractions) that they are likely to be challenged on equal application and due process grounds. (And you thought the “Green Police” Audi Superbowl ad was scary enough…)