Colorado’s Abusive, Intrusive, Counterproductive, Sacred Cow: The Business Personal Property Tax

Among Colorado state government policies, probably none is more hated and criticized but more entrenched and unassailable than the Business Personal Property Tax. That levy amounts to government’s demand that businesses pay the state an annual ransom based on the value of everything they own that isn’t real estate.

It’s an irrational tax based on nothing more than ownership of objects that do not drive any particular need for government services. The accidental or deliberate genius that protects the Business Personal Property Tax, or BPT as insiders call it, is that the majority of its revenues go to the local governments where the business operates. This creates an iron coalition of Democrat lawmakers who tenderly love and protect any and all revenue sources, and local government officials—even Republicans—who also tenderly love and protect any and all revenue sources.
In this correspondent’s 14 years as a Colorado State lawmaker, there were many spirited efforts to whack the BPT. The score is BPT many; whackers zero.
The familiar pattern is that a newly elected Republican lawmaker gets an earful from business people about the hated BPT. He enthusiastically responds by introducing a bill to kill or cut it. Then the iron lobby goes to work. All the Democrats are already in the bag. Local government officials, usually Republicans, descend on their local lawmakers. “This will hurt schools. This will hurt parks. This will hurt community services. This will hurt children. This will hurt seniors. This will hurt women and children. This will hurt unicorns.”
Enough Republicans can’t withstand the onslaught that the measures always die a tortured death.
One memorable assault on Mount BPT came from a fresh, talented new senator who was sure he had the logic, the skills, the coalition, and the darn rightness of cause to conquer the BPT. By the time the negotiating and amending was over, he had a bill with a 40…yes forty…year phase in to allow local governments to weather the shock of reduced subsidies from a state tax. It still faced significant opposition and died a quiet death on the calendar.
The fresh, talented senator has since concluded his public service and returned to his professional career. The BPT stands unmoved and untouched. There have been two whack-it proposals this year. Both aim to increase the base amount of property exempt from the required annual tribute from the laughable $7,300, one to $10,000 and one to $50,000. The iron lobby is warming up for batting practice.
Among many problems with the tax, it bears no connection to any economic theory of taxation beyond brute state theft. It does not tax profits or even revenues. It does not tax anything related to the need for government service, like a gas tax for roads, or a property tax for police and fire protection. It is simply a demand that businesses pay government an annual exaction for things businesses own. But, business—its consumers, really—already paid sales tax on the newly purchased property, and pays income tax on any profits it makes using the property. Worse, the BPT is a disincentive to invest in new property and equipment, because it adds cost permanent annual cost to everything a company might buy.

In this age of heightened concern about government surveillance and reasonable privacy interests in the private sector, one argument surprisingly has not played a major role in the debate: the strip search nature of the Business Personal Tax. In order to pay or enforce the tax, business must inventory, and revenue agents must audit, all the property a business owns. Computers, servers, networks, phone systems, software, files, desks, shelves, furnishings, cars, vans, shuttles, utility vehicles, scooters, forklifts, warehouse storage shelving, tractors, harvesters, tools, machinery any and everything that is used in an industry, trade, or field.
Someone needs to take up the argument that it is none of government’s money-grubbing business what a company owns. Government might tax accounted profits, but it has no legitimate business looking down companies’ shorts that way. Well, a Republican can dream libertarian dreams, can’t he?