Bredenkamp Testifies on HB 1195


CFB Executive Vice President Troy Bredenkamp testifying in House Finance Committee against the removal of the sales tax exemption on Ag Compounds and Pesticides.

Colorado Farm Bureau
Testimony on HB 1195
Before the Colorado House Finance Committee
January 29, 2010

Mr. Chairman, Good morning.

My name is Troy Bredenkamp, Executive Vice President of the Colorado Farm Bureau, Colorado’s largest agricultural organization.  I come before you this morning on behalf of Colorado Farm Bureau and our 23,000 member families, the Colorado Cattlemen’s Association and the 28 member organizations of the Colorado Ag Council to express our strong opposition to HB1195.

As most are aware, Colorado agriculture is a huge part of the Colorado economy.  The ag industry as a whole, is the second largest industry in our state, made up of over 20,000 farming operations, farm families, businesses – responsible for over $16 billion of impact to Colorado’s economy.  You have just been told the Colorado Department of Agriculture’s general fund take is less than 0.01% of the entire general fund budget.  I would say spending less than one tenth of one percent on the 2nd largest industry…and industry generating over $16 Billion of economic activity in Colorado is a pretty good return on investment in anybody’s book.

HB1195 would impose sales tax on some agricultural inputs and in particular, agricultural pesticides, herbicides along with livestock related inputs such as vaccines and yes, even bull semen.

Just for clarification, agricultural inputs include everything required to produce agricultural products.

Most states in the US exempt agricultural producers from state sales tax on agricultural inputs, including the majority of those included in HB 1195.

The research we were able to conduct indicated that only five states require state sales tax on ag related chemicals (Arizona, California, Hawaii, Nevada and Wyoming), it is important to note that Nevada and Wyoming do not collect state income tax so one could argue many of their sales tax collections are  a wash for most producers.

For representative Kagan’s benefit, we even did a bit of research on this subject in the United Kingdom.  We understand that a comparison to English Law seems to be a regular theme in this legislative session.  Our research indicated that there is no tax on fertilizers, pesticides and antibiotics/vaccines in the UK.  This makes some sense since the UK imposes a Value Added Tax system on businesses and manufacturers but do not charge the tax on food at the retail level.  This makes sense.  If you don’t tax the end product, why would you impose sales tax on the inputs related to the production of those end products?

But the main competition for Colorado ag producers is not the UK, or Brazil or even Argentina.  Our primary competition is producers in states like Kansas, Nebraska, Missouri and Iowa…all of which do not impose a sales tax on agricultural inputs such as the ones included in HB 1195.

Make no mistake, this tax increase will put Colorado ag producers at a competitive disadvantage compared to producers in nearly every other state across the US.

Unlike others testifying on similar tax increasing bills, I will not sit here before you and try and guest how many jobs will be lost with this particular bill.  But I will tell you that it will definitely have a negative impact on nearly every Colorado ag producer’s bottom line.

Allow me to paint a quick picture for you…We asked one of our members to assess what this tax increase (along with the increase this committee has already approved through HB1190) would have on their operation.  This particular farm operation includes 2,500 acres of crop production and a 5,000 head cattle feed yard.  Their assessment was an additional $11,000 per year.  And this is just one of 20,000+ producers impacted by this tax increase.

Now, will this tax put this producer out of business??  Probably not.  But it will be $11,000 less per year that this farm family will have to spend in their local economy, expanding their operation or paying for additional employees or seasonal help.  I don’t know where this additional $11,000 in revenue will go once it becomes the property of the State of Colorado, but I do know local businesses, local governments and yes, the local school district will be negatively impacted because this $11,000 won’t have the opportunity to become part of the local economy.

And what about the impact this tax increase will have on Colorado’s dairy producers.  Currently, Colorado dairy producers are losing $3,000 in every truckload of milk that you see travelling down the road.  I guess what is another few cents on the dollar loss for these ag producers…  And I understand that bull semen has been the butt of a lot of jokes and snickers around this building.  But please keep in mind, if you are a beef producer or a dairy producer, bull semen is every bit as critical of an input into the production of their respective products as corn, or hay or silage is…

A statement was made earlier in this hearing that the Governor’s office had been working with various industries regarding this suite of tax bills. To my knowledge, no one from the agricultural industry was ever contacted by the Governors office regarding this particular bill and/or the fast-tracking of this bill.

Regarding Governor Ritter, I had the opportunity to hear his remarks at a recent meeting of ag leaders.  In those remarks the Governor stated how much he admires agricultural producers and in particular, admires what we do on a daily basis…operating with razor thin margins.  He was correct to admire Colorado’s ag producers.  The average return on investment for anyone involved in agriculture is 1 to 3%.  That’s it…and it make take several years to hit that average.  One can see that it doesn’t take a whole lot of financial loss to push agricultural operations into a negative financial position.

What this administration and this committee are failing to see is that of all the tax increases being proposed in this series of bills, Colorado ag producers have the least ability of all effected industries to pass these taxes on…it will just need to be absorbed like so many other things as the cost of doing business in Colorado.

Some of you may think that agriculture is not doing it’s share or part in this time of extraordinary times and shared sacrifice…I would beg to differ.

The industry has already made up the bulk of the $3 million loss in the general fund budget of the Department of Agriculture in cash funding through increased fees.  Add this $3 million to the tax increases in HB 1195 ($4.8M) along with the tax increases for agriculture in HB 1190 ($4M+), and this industry will more than double the $5 million amount left in the general fund for the Department of Agriculture.

What is probably most difficult for ag producers across Colorado to figure out is this…why would legislators begin to go down the road of taxing the individual inputs into a manufacturing process when at the end of the day, the state of Colorado does not collect a sales tax on the finish product…food…when it is sold at the retail level?  It makes zero sense.

They don’t appear to tax the inputs on the production of sale tax exempt food in Great Britain, they don’t appear to tax the inputs on the production of sales tax exempt food in nearly every other state in the union, and we should not impose a tax on those least able to either absorb the tax or pass it along for the production of sales tax exempt food here in Colorado.

In conclusion,  there has been much said about how these sales tax exemptions benefit only a select few “special interests”.  I’ve got news.  Those supporting these tax increases are “special interests” as well.  We are all “special interests”.  The Colorado Farm Bureau is a “special interest”.  We have a special interest in making sure that the business climate in Colorado is such a way that not only allows Colorado agriculture to survive…but to thrive.

On behalf of the Colorado Farm Bureau and the entire Colorado agricultural industry, I strongly urge a “NO” vote on HB1195.

Thank you.

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One response to this post.

  1. Posted by Albert Krueger on February 1, 2010 at 2:33 pm

    Thanks Troy. Well put

    Reply

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