DelGrosso falsely claims Amendment 66 would increase taxes on small businesses

(We suspect there will be a high demand for fact checking this fall – Promoted by Colorado Pols)

On a Sept. 5 show, KFKA talk-radio host Tom Lucero told Colorado House Minority Leader Brian DelGrosso that government shouldn't be an obstacle to small business.

Agreed. But talk-radio hosts shouldn't be an obstacle to small business either. Or to educating our children.

But Lucero established himself as such an obstruction by failing to correct DelGrosso when the new Colorado House Minority leader claimed that Amendment 66, which would raise income tax to support education, would be a burdensome tax on small businesses:

DelGrosso: Well, the reality is, I think it’s mid- to upper eighty percent of all businesses in Colorado are small businesses. And close to eighty percent of those small businesses are set up either as a sole proprietorship, an LLC, or an S Corp., which means that their taxes that their business makes flows through onto their personal income tax. So, you will see about 80% of businesses in Colorado see a tax increase as a result of this. [Listen here.]

But Amendment 66 doesn't affect Colorado taxes on businesses. It's a tax on "individuals, estates, and trusts."

It's true that some business owners (like me) choose to take profit from their businesses (e.g., in the form of dividends) and account for it on their personal income tax filings. But that's because it's their income! So they pay personal income tax on it, just like they would income from any other source or employment.

If you make income from a business, whether you own the business or not, you pay income tax. The individual would be taxed, not the business, under Amendment 66, and no one will be taxed twice. 

With Lucero apparently agape at the fictitious thought that small businesses could be facing a new tax, DelGrosso went on to say:

DelGrosso: When the taxes go up, not only does that get passed along to the consumer, another way that that affects folks is that affects pay raises for the business. So maybe, because the taxes went up, I’m not going to be able to give pay raises this year. I’m not going to be able to hire somebody, or I’m going to have to let somebody go, or I can’t expand.

It's hard to imagine a small business owner who would look over his personal budget, including the income from his LLC or S Corp, and decide not to invest more in his business due to the tax increase under Amendment 66.

ColoradoCommitsToKids calculates that an individual making the gross median income of $57,000, will pay an additional $211 in tax. A small businessperson who claims gross income on his individual income tax return of $150,000 will pay an additional $24 per week. Double that and it's still not enough for the greediest capitalist to do much with.

But, collectively, it's enough to give our kids the opportunity they deserve to succeed on Colorado.

That's why media figures like Lucero, whose background as a former CU Regent should sensitize him to the educational needs of our kids, should counter DelGrosso's misinformation with facts. Or have an educator on the show who can.

12 Community Comments, Facebook Comments

  1. JeffcoBlueJeffcoBlue says:

    They're going to pull all the same BS they pulled with Prop 103. Fortunately we've got more resources to back than Rollie Heath this time.

  2. itlduso says:

    Good analysis, Jason.

    Successful small businesses will pay more taxes in the same vein as successful employees will pay more taxes.  It's wrong to claim that all small businesses will pay more taxes, just as it is wrong to say that all employees will pay more taxes.

  3. BlueCatBlueCat says:

    The reason most small businesses can'r hire, give raises or expand is because business sucks. Business sucks because too many people don't have enough money to spend. I'd love for our small  business to be doing as well as it did back when taxes were higher before Cheney/GW.  Our biggest personal income tax "break" has been drastically lower income to pay taxes on, not the rate. Not the break you like to get. And of course Jason is absolutely right about what constitutes personal income taxes whether it's from your business or a paycheck or any source so it's bull from top to bottom, inside and out.

  4. DavidThi808DavidThi808 says:

    If you're an S-corp, then the profits from the company are rolled into your individual income and the total is then what you pay individual income tax on. So they are correct in that any income over the breakpoint will be taxed at the higher level.

    And that does have an impact on hiring. Because that profit, at least in the case of my company, goes into a reserve and hiring additional people is limited not only by cash flow, but also by having enough reserves to cover those additional people if we have slow months.

    Not a reason to vote against it. As a business we need well educated people, both as employees and working elsewhere to improve the economy and thereby increase business. But it will impact people who hold S-corps that make a good profit.

    • BlueCatBlueCat says:

      Pretty sure the percentage of small business owners who are both S-corp and who would find themselves above the breaking point is far less than mid to upper 80 percent. Pretty sure a lot of those above the breaking point are the type that manage to be small according to the rules but aren't what most people think of as small businesses. Bottom line, the percentage of small businesses that would be  in any danger of being at all adversely affected is nowhere near what DelGrosso claims. The real drag on the economy is a poorly paid workforce without enough money to spend.

      • If you're running a decently profitable business, it doesn't take a lot to hit the cut-off point.

        But at some point, if you're running a decently profitable business, an S-Corp isn't the way to go any more. When you're contemplating significant payroll reserves, multi-year capital expenditures, and other long-term planning issues, you are at a point where you should probably think about reincorporating under a structure where the company can hold its own profits.

        • DavidThi808DavidThi808 says:

          My accountant keeps telling me we're better off as an S-corp. But we're a weird beast, a growth stage software company that's profitable. Because we're software we don't have much in the way of capital expenditures and we handle R&D as an immediate expense. And because we're profitable, no need to move losses forward.

          I don't think the two tax rates will change what works best for us.

          And B/C is right. Yes 80% of businesses in Colorado are small businesses. But I'll bet 90% of them don't make enough to hit the higher tax bracket.

          • That might be for you, David. How much would a couple of percent over $75k/yr. hurt your payroll reserves? That seems like a relatively slim trim off of the margin.

            • DavidThi808DavidThi808 says:

              I agree it's minor. A much bigger point is that our biggest problem by far is finding qualified people to hire. We always have opening where we're looking for people. So pay a few $$$ more and in return eventually have more qualified candidates – that's a no brainer for anyone who looks more than 5 years out.

        • BlueCatBlueCat says:

          The best info I could find was a claim that as many as 75% could be affected and that was from a business oriented source. But there is a big difference between any affect at all and a painful one or even a meaningful one.

          As Jason points out, the amount for most would not be enough to force changes in business investment plans. People invest in their businesses,  keep old employees and hire new ones when the number of people walking through their doors  with money to spend make that the sensible choice. Businesses become unprofitable when those folks with money are lacking.  

          Nobody whose business is thriving and who doesn't have enough employees or enough inventory to keep up with all the customers is going to be laying people off or failing to meet demand because of a small change in taxes. No amount of lowering taxes will save a business that isn't being supported by a customer base without enough money to spend. 

          We ave been allowing everything from infrastructure to education to quality healthcare to whither  ever since we started listening to conservatives and their completely discredited by reality policies. 

          We're told there's no problem that can't be fixed by cutting taxes and slashing government, that low wages are great because they make for low prices, that everything, including education, prisons and the military should be turned over to private contractors who will do everything more efficiently, better and cheaper, that we need to get rid of regulations in everything from banking to worker safety and public health, that if we pay living wages  we'll suffer for it.

          We have accepted these policies to a frightening degree for decades and the result is a country in which it's a toss up as to which is deteriorating faster; our middle class or our infrastructure, our social mobility or our access to healthcare. 

          I don't give a damn about this or that isolated technically correct detail. OK, some small business owners will pay a bit more. The big picture remains clear. It's time to reject the whole discredited load of crap that says the way to prosperity is to continually lower taxes, wages, cut  the public work force, deregulate and privatize everything in sight.

          How many more decades of failure of those policies will it take to get people to see where the entire edifice of conservative garbage policy is taking us? It's already done more damage to America than any terrorist ever dreamed of.  Eisenhower would be horrified at the condition we've sunk to. We have third world health stats, less social mobility than western Europeans, less access to quality education and an infrastructure the world's only remaining super power should be deeply ashamed of. And it's because of crap like this.

  5. exlurker19 says:

    David's right about the S Corp thingy.  But I still think it's a great idea.  Oh, yeah, small businesswoman with an S Corp here.

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