< PREVIOUS ] [ 2007 Index ] [ Ed Quillen HOME ] [ SEARCH ] [ NEXT >
Last week, our governor presented some proposals to make
Colorado more business friendly.
On at least one of
them, he deserves whole-hearted support, even though it
doesn't go far enough and fast enough.
Gov. Bill Ritter wants the state to simplify the
business personal property tax.
It's a confusing
mess that I have to deal with every year, since I am a
self-employed small-business owner with computers, desks,
file cabinets and the like which are used in the generation
of income (although not nearly enough, alas).
As the law reads, I'm supposed to file a declaration
every year of such property. Since most of this property is
computers and peripherals, I'll focus there. Except for an
old IBM Thinkpad T-22 laptop, I can't list something like
Dell Legatron 2X43, purchased for $983 and put into
service in 2006.
That's because I build my machines
from parts I gather here and there. It often costs more,
but it's easier to keep the machines running if they use
off-the-shelf parts, rather than proprietary
components.
Thus in the declaration, I'm supposed to list something
like Made-in-China small-tower case with obscure-brand
450-watt power supply, Abit KV-80 motherboard, AMD Athlon
64 CPU, 1 gb DDR of unremembered origin, Seagate 80-gb
3.5-inch SATA HDD, probably an NEC CD/DVD R/W drive but I
don't feel like opening the case to be sure, PCI Ethernet
adapter scavenged from the junk box after the built-in one
on the motherboard flaked out, Microsoft Linux keyboard
(honest, that's what the receipt says) ...
How do you appraise this? Market value? Used computers are essentially worthless, and may even have negative value when you consider the rising cost of disposal in an environmentally benign manner. Replacement cost? I'm not sure anybody still makes hard drives as small as 80 gb any more, so would you figure it at 1/3 the cost of a 250-gb drive?
It's cheaper just to pay the penalty for failing to file the declaration than it is to compile the list of what components were in use on Jan. 1.
The state eases this burden with a $2,500 exemption,
although even that is too complicated for some people to
understand. A story in the Rocky Mountain News last week
said the tax must be paid if a company owes $2,500 or
more.
No, the tax must be paid if a company has more than
$2,500 worth of business personal property.
If I
worked at it, I could likely get my assessed actual
value
of $6,836 down to under $2,500, and then I
wouldn't have to pay the tax.
But that tax bill this year was only $84.74, and getting around it would take several days of labor that could invite a lengthy visit from an appraiser, who might not know a SCSI adapter from a router. Minimum-wage work would pay better for the time spent. Besides, the money goes to the school district, city, county, library, hospital -- important local services and facilities.
Gov. Ritter proposes to raise the threshold from $2,500 to $7,000. That's a good step, although he wants to phase it in over five years, instead of immediately. And after that, he wants to tie the threshold to the inflation rate.
A better approach: Ask Colorado's county assessors to set a reasonable threshold. At this county's Democratic precinct caucuses last year, my group was mostly fellow entrepreneurs. We discussed this tax and its compliance costs, with the notion of putting forward a resolution to simplify the tax. We cornered Joanne Boyd, our county assessor, for some advice on wording the resolution.
She said she couldn't help much because the issue is
rather complex, but added that she was no fan of the
current system. For you small businesses,
she said,
the tax costs more to administer than we collect. But I
have to follow the law.
She estimated that it costs at
least $75 per business per year to administer -- for a tax
that might bring in only $40 or $50 from a given small
enterprise.
Dave Wissel, Park County assessor, confirmed that when I
called him. I don't know the precise cost of our
overhead, but I'm sure that what we get in personal
property tax from small enterprises is less than what the
county has to spend on employee wages, postage and
record-keeping.
So why not get the county assessors to figure their costs, and set the threshold at the amount where the counties wouldn't lose money on the tax? A tax that costs more to collect than it brings in is a tax that needs some work, the sooner the better.
< PREVIOUS ] [ 2007 Index ] [ Ed Quillen HOME ] [ SEARCH ] [ NEXT >