New Democrat Update - November 2007

HELPING COLORADANS GET AHEAD

Governor Bill Ritter and his fellow Democrats in the General Assembly are proposing a number of thoughtful economic growth proposals for the legislative session next January. As articulated by the Governor, the goal is to make Colorado "the most competitive business environment in the United States.”

The economic landscape has certainly changed in the last two decades. The information technology revolution has expanded well beyond the cutting-edge high-tech sector, shaking the very foundations of the old industrial and occupational order, redefining the rules of entrepreneurship and competition, and creating an increasingly global marketplace for a myriad of new goods and services.

Of course, the main burden of meeting this new competitive challenge falls on Colorado's firms and workers - indeed, public policy should always recognize that the private sector is the principal engine of job creation and economic growth. The public sector should be a very valuable partner.

Which is why Democrats should be about finding ways to help boost the true sources of prosperity in the economy - higher productivity. Long-term prosperity will come to those states that find ways to achieve higher levels of entrepreneurial dynamism and competition, reduce delays between design and production of products, faster times to market, increased economic diversity and constant technological innovation. Our party should also oppose policies that seek to divide a slowly growing pie, protect or reward special interests at the expense of overall economic progress, or slow down the process of change.

The Governor’s proposals help promote an entrepreneurial business environment and refocus tax, regulatory, and investment policies to encourage research, innovation, investment, exports and productivity. To that end, state government will be doing its part to make it easier to create new businesses, spur expansion of existing companies, open new markets overseas and bring in foreign investment.

Fostering the creation and expansion of small business is especially crucial. States whose economies grew fastest in the last decade were ones with the fastest rate of economic "churn" - the birth of new businesses, as well as the death of old businesses.

The Democratic package includes a proposal, sponsored by Rep. Joe Rice and Sen. Suzanne Williams, that will exempt over 30,000 small firms from having to pay the business personal property tax, saving companies both valuable time and money. In addition to being difficult and sometimes costly to calculate (often the cost of collection exceeds the actual amount paid), the current tax discourages investing in productivity-enhancing assets like manufacturing equipment and office computers. The reform results in a minimal reduction in revenue to the state.

Another key initiative, sponsored by Rep. Cheri Jahn and Sen. Brandon Shaffer, reduces taxes on jobs and business investment and cuts red tape, changing the way multi-state companies calculate their Colorado corporate income taxes. The new, simplified formula promotes new job creation because it is much friendlier to companies that employ workers in Colorado and those that generate significant sales outside the state. It boosts Colorado’s competitiveness because other states in the region - including Arizona, Idaho, Nebraska, New Mexico, and Utah - have adopted a similar formula. State revenues - in other words, Colorado’s ability to make other productivity-enhancing investments - will not be affected because firms that produce goods elsewhere and import them into Colorado will pay more.

Innovation is one of the most important ingredients for a prosperous economy and broader income growth. However, in a hyper-competitive economy, it has become increasingly difficult for the private sector to maintain its investments in long-term research and development activities. Private-public partnerships can be key to spurring job-creating investments that the economy needs but the private sector often cannot afford on its own.

The Governor’s proposed $3.5 million Bioscience and Life Science Fund is critical to filling a gap that will promote the expansion, retention and attraction of high-skill, high-wage bioscience companies. Sponsored by Rep. Jim Reisberg and Sen. Bob Bacon, industry-academia partnerships will be encouraged so that new innovations developed in the lab can be more readily and quickly commercialized.

Other private-public partnerships will be formed as a result of the Governor’s proposal to dedicate $3.5 million from the Clean Energy Fund, created earlier this year, to nurture the growth of renewable energy businesses. In addition to the possible creation of a business incubator for the industry, up to $1 million will be made available to such companies seeking funding assistance.

Strangely enough, sales taxes are currently levied on aircraft built in Colorado but sold to residents of other states or countries. Eliminating the so-called "fly away" tax, sponsored by Rep. Bernie Buescher, could spur development of another brand new, high-paying industry. It is certainly worth a try - the state gets zero revenues from the tax because it has discouraged companies from even considering manufacturing planes here in the first place.

Finally, the package includes a proposal, sponsored by Rep. Mary Hodge, to make it easier for rural small businesses to qualify for job-creation incentives. Another initiative partners with the tourist industry to develop more effective advertising campaigns that attract more visitors to the state. A study concluded that every dollar Colorado spends on marketing for tourism generates another $18.10 in tax revenue.

BUILDING ON SUCCESS

These proposals rest on a solid record of accomplishment from the 2006 session, everything from emphasizing research and development to innovation to promoting exports to making life a little easier for small businesses.

Legislation, sponsored by Rep. Jim Riesberg and Sen. Ron Tupa, helps small businesses and spurs economic development by bringing biofuel and bioscience technology out of Colorado university laboratories and into the marketplace. As demonstrated around the country, new businesses, companies and partnerships often spin off research being done on college campuses. The initiative has already provided matching grants to 27 bioscience projects at six Colorado universities and research institutions.

Since the 1980's, Colorado has provided sales and use tax exemptions for manufacturing businesses to encourage job creation. Rep. Jahn successfully passed her proposal to ensure that the building of high-tech cleanrooms (facilities that must operate in strictly dust-free environments) and the purchase of related equipment, just like assets in other business, would not incur sales and use taxes.

The exemption serves as a catalyst to develop and manufacture high-value products in the bioscience, software, nano-technology, pharmaceutical, computer component, and photonic industries. As a result, these companies will be more likely to grow, hire more employees and be more able to go toe-to-toe with their competitors in other states and countries.

Promoting international exports is essential to ensuring that Coloradans prosper in the global economy. Rep. Alice Borodkin’s legislation ensures that a trade representative in the Colorado International Trade Office is available to help small businesses sell their products overseas.

Sometimes it is the cumulative effect of implementing many “little things” that can add up and make it easier to do business. Rep. Joe Rice’s legislation is making it possible for small businesses to save some time by allowing those that own multiple vehicles to have their vehicle registrations renewed on the same day. Like his business personal property tax reform, it saves money and, especially valuable in a small business, time.

There is so much more that Colorado must do to make it the best place to work and live. The most critical are funding and smartly reforming the big-ticket items like public schools, higher education, transportation and health care, as well as a modernized, 21st century state government.

Getting all of the above right will be a big boost to the pocketbooks of Coloradans. Politically, if Democrats are the ones to do it, voters will start realizing which party is best for their economic futures. Besides, political parties that do not offer new solutions to the challenges our state faces do not deserve to lead.