April 16, 2015 08:51 AM UTC

Fighting Overseas Tax Havens to Help Colorado's Schools

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• by: Jason Salzman

(Promoted by Colorado Pols)

It’s gotten to the point where everyone in Colorado wants politicians to find a way, somehow, to tax the money big corporations hide to avoid paying taxes, and then to use the tax revenue from these hidden profits on education. Okay, not everyone wants this but, seriously, most of us do.

But how to do it in a way that’s got a prayer of untying the knot of legal restrictions (TABOR) and divided government?

Democrats in the state legislature may have hit on a way to get this done.

Standing inside the Capitol on the eve of Tax Day, state lawmakers unveiled legislation that would stop Colorado corporations from hiding profits in overseas tax havens, like the Cayman Islands. Closing this tax loophole would generate a tidy $150 million in tax revenue annually that would go to education.

“There are some corporations that don’t pay their taxes, like the rest of us do,” said Rep. Mike Foote at the April 14 news conference, as you can see in a Denver Business Journal video here.

“They do get a chance to use our roads, to take advantage of educated folks to work in their businesses, courts for dispute resolution and so forth. But they don’t pay for the use. It’s not fair to the state of Colorado. It’s not fair to the rest of us. And this bill will address that lack of fairness by closing loopholes that some corporations use by funneling their money offshore in order not to have to pay taxes on it.”

The bill, sponsored by Foote and Rep. Brittany Pettersen of Lakewood, would not only have to clear the legislature but also be approved by voters in November. So it has a long way to go.

But similar bills became law in Montana and Oregon, picking up bipartisan support along the way, according to the bill’s sponsors.

So you’d think a bill like this would have a chance here in Colorado, where the public is overwhelmingly in favor of such measures, according to a polls.

The Denver Post’s Joey Bunch reported that the legislation is opposed by The Colorado Association of Commerce and Industry:

“We understand the intent to eliminate the shifting of income to tax havens to avoid Colorado taxes,” said Loren Furman, CACI’s senior vice president for state and federal relations. “But, there are many instances where legitimate business is conducted in these countries, and that income may not have been subject to Colorado tax.

It’s really hard to see why this is a concern, given that the focus is collecting taxes from normal business operations, especially if you look at how the bill would work. Ed Sealover at the Denver Business Journal explained:

Colorado law currently requires companies doing business here to pay taxes on the portion of national income that the corporation generates in this state. But that equation gets more complicated with companies that off-shore some of their business by setting up subsidiaries in tax-friendly countries, transferring intellectual properties to those subsidiaries and have the subsidiaries sell that property — such as, say, a logo — back to the main corporation for a cost that sometimes can be as large as the overall profit that corporation makes in the U.S., Foote said.

HB 1346 would force those companies to combine their offshore income with their American income to determine the amount of taxes they must pay to Colorado, a change that could raise another $100 million to $150 million for the state, Pettersen said. If it passes, the bill then would authorize a statewide ballot initiative seeking to keep money coming in from that source and put it to the State Education Fund rather than be forced to refund it to voters for being in excess of the revenue cap imposed on the state by the Taxpayer’s Bill of Rights.

So will people believe The Colorado Association of Commerce and Industry? Or will they believe Pettersen when she says, “Big corporations shouldn’t leave the rest of us on the hook because they know how to game the system and avoid paying their fair share.”