The Colorado Chamber of Commerce expressed surprise and dismay with U.S. Sen. Michael Bennet over a proposed tax increase on large companies, the Denver Business Journal reports.
Bennet is pushing the plan in President Biden’s $1.75 so-called Build Back Better reconciliation bill that creates a minimum corporate tax of 15% for large companies with book income over $1 billion.
Ultimately, that comes out to an estimated $320 billion tax increase on affected companies over 10 years.
The Chamber told the Business Journal there are two enormous problems with this proposal.
First and most importantly, the plan raise taxes on companies that are leveraging deductions to write off capital expenditures like equipment used in manufacturing.
It would seem counterintuitive to most people to raise taxes on a company simply because they chose to lower their tax bill by investing in Colorado workers and equipment. However, that’s precisely what Bennet wants to do in the name of fairness.
Firms that sell equipment to large corporations that use accelerated depreciation (which Bennet’s plan eliminates) to deduct the cost from their tax bills would also be hurt in the process.
Secondly, Bennet’s plan would introduce a series of massive compliance problems for large companies that would be taxed on an entirely different formula than existing law.
According to the Tax Foundation:
A minimum tax on book income would introduce significant complexity into the corporate tax code while outsourcing key aspects of the corporate income tax to unelected decision-makers at the Financial Accounting Standards Board (FASB), who establish the standards for corporate book income. It may also undercut other proposed changes to the tax code, such as Biden’s proposed tax credit for onshoring of American supply chains.
In other words, Bennet’s tax increase would also create a massive clusterf**k for some large employers in Colorado like DISH, which had an effective tax rate well below 15% last year.
The Chamber also told the Business Journal they were dismayed Bennet and other Democrats dropped this proposal without any input from Colorado businesses.
“We find it surprising that this proposal would be pursued so late and was not put forward during the regular legislative process to allow for public hearings and input from Colorado businesses,” Furman added. “This proposal was not shared in advance with Colorado business organizations which represent hundreds of businesses across the state.”
There’s probably a good reason why Bennet decided to go over their heads with this proposal.
Congress passed a similar scheme to Bennet’s in 1986, but ultimately had to repeal it barely a year later after the politicians realized what a mess they’d created.
Bennet too probably understands his tax increase is on shaky ground, but that’s probably a secondary concern for Democrats who need that $320 billion revenue figure so they can lie to voters and claim Biden’s $1.75 trillion bill is paid for.
The results of Bennet’s scheme would be grim. Either large corporate employers get stuck with a massive $320 billion tax increase, or Biden’s bill would explode the deficit well beyond what Democrats want to admit.
Should Bennet and Democrats ultimately put this myopic tax increase into law, we anticipate voters will become intimately acquainted with its impact on Colorado businesses next year.