Bill would allow tax credits for rehiring laid-off workers
By Marianne Goodland
The battle over tax exemptions got new life on Tuesday, when a Senate committee approved a bill to provide tax credits for businesses that hire laid-off workers.
Senate Bill 133 is sponsored by Sens. Rollie Heath, D-Boulder, and Chris Romer, D-Denver, and by Rep. Joe Rice, D-Littleton. The bill would provide a short-term credit on federal insurance contributions (FICA) for businesses that re-hire their own laid-off workers.
Under SB 133, beginning January 1, 2010, businesses that hire workers they laid off in 2009 would get a two-thirds FICA credit for re-hiring those workers through April 30. On May 1, that credit would drop to one-third of the FICA through August 31. The laid-off employee must have worked for the employer for a full year prior to being laid off, and once re-hired, would have to work for that employer for a full year. In addition, the employer would have to sign an affidavit stating that without the credit the employer would not have re-hired the laid-off worker within the time frame specified in the bill.
The credit would apply only for the income tax year beginning January 1, 2011, so the tax credit would not be applied until income taxes are filed in 2012.
The fiscal note for SB 133 indicates the bill could result in a 2010-11 and 2011-12 general fund revenue decrease of about $5.5 million for each year. It also estimates that as many as 7,300 workers would be rehired sooner, by one to two months, because of the incentives provided under SB 133. But the bill sponsors said Tuesday during the hearing they believed that estimate to be overly optimistic.
“This is a short-term incentive,” Heath told the business committee Tuesday. “You have to have the business for this to work.”
Republicans were ready to pounce, tying the bill to the General Assembly’s recent action to repeal certain tax exemptions and income tax credits. Sen. Greg Brophy, R-Wray, noted last week that SB 133 would encourage employers to re-hire laid-off employees while at the same time the General Assembly was voting on bills that would result in more lay-offs.
Sen. Shawn Mitchell, R-Broomfield, pointed out during Tuesday’s hearing that SB 133 would provide $5 million in relief while the Legislature had just added $150 million in tax burdens.
“Is this cause for business to ‘high-five?” he asked.
“It’s not the same,” replied Heath.
Mitchell also pointed out that SB 133 wouldn’t apply to people who were laid-off as a result of the tax exemptions bills. But Heath called that a “perverse incentive,” stating that if businesses laid-off people after the tax bills went into effect, they could “game the system” by immediately rehiring those workers. So why couldn’t the bill apply to companies that never had to lay-off workers at all, Mitchell asked, instead of providing the incentive to companies that he said had “failing” track records. There are all kinds of ways to incentivize businesses, Heath explained; SB 133 is one way to do something that isn’t already covered by other incentives.
The committee debate at times got heated. Romer went on the attack several times over Republican viewpoints on the tax package, earning at least three requests from committee chair Sen. Lois Tochtrop, D-Thornton, to stick to the bill. “This is the difference between our party, which sticks up for small business,” and the Republicans who stick up for “Wall Street,” Romer said. “We’re not defending special interest tax breaks. This is for Main Street…this is tax policy that helps in a recession, rather than having the best lobbyists [who got] special interest tax breaks ten years ago.”
Mitchell and Sen. Mark Scheffel, R-Parker, suggested the bill sponsors amend the bill to provide similar incentives for companies that didn’t lay off workers, or for companies that were hiring new workers. Heath said he would be happy to write a new bill, and go to Senate President Brandon Shaffer, D-Longmont, for late bill status on it. “I’ll stand with you to broaden this,” he said. “I’ll work on it today.”
Sen. Ted Harvey, R-Highlands Ranch, tried twice to amend the bill to include some of his ideas but those amendments failed on party line votes. He also asked that the bill be laid over while he and Heath work out some of those ideas, which Heath said he was “not inherently against” but for the delays they would cause. “I’m calling your bluff,” Harvey said.
Mitchell proposed the committee send a letter to Shaffer asking for late bill status, a suggestion Tochtrop said she would support.
No one testified either for or against SB 133.
SB 133 was approved on a 4-3 party line vote and sent to the Senate Appropriations Committee.
Heath told The Statesman later that he would ask that the Appropriations Committee review the bill on Friday; if passed by that committee he said he would try to get it out of the Senate early next week, with a goal of having it to Gov. Bill Ritter for signing before March 1.
After the hearing, Romer and Heath held a press conference, which Mitchell attended, to discuss the bill.
“This bill is far too narrow,” Mitchell said. “It’s political gamesmanship” that covers up the devastation caused by the tax exemption bills, he added.
Heath said there was no testimony on SB 133 because none was needed. The Senate needed no convincing, he told reporters, but that is likely to change once SB 133 gets to the House, where he said the bill will need help because some Democrats are “skeptical.” Romer said SB 133 is the only bill in the Legislature that could lead to 5,000 workers being rehired who are currently unemployed. If an employer is on the fence [about rehiring], we hope this is enough to tip the scale to rehire,” said Heath. But “if not one person is rehired [as a result of SB 133] we haven’t lost anything.”
The day also included more dueling press releases. Senate Republicans claimed a similar idea failed once before, during the administration of Pres. Jimmy Carter. “This proposal failed miserably in 1977, and it’s going to fail miserably today,” said Sen. Bill Cadman, R-Colorado Springs. “Those who do not learn from history are doomed to repeat it is a statement more often quoted than heeded. Senate Bill 133 will bear that out.”
Republicans also called Democrats hypocritical for raising taxes on one hand while offering new tax credits on the other. “Maybe Democrats wouldn’t have to pass tax credits to incentivize hiring if they would stop pressing forward with policies that drive jobs out of Colorado,” Cadman said.
Democrats countered two hours later. “The great thing about this bill is that it helps small businesses, laid off workers, and working families,” said Rep. Joe Rice. “In times like these, that’s exactly what we should be doing. I’m sponsoring this bill in the House because it reflects my top priority — putting Coloradans back to work and getting our economy back on track.”