The number of open small businesses in Colorado has declined by over 40% from before the pandemic. According to a new Independence Institute study, state mandates and economic lockdowns are largely to blame.
Now, Governor Polis has proposed more government intervention and spending to aid the businesses his administration helped cripple — or at least those that survived.
“[T]he number of small businesses open in Colorado in June 2021 was an astounding 43.2% lower than the pre-pandemic level in January 2020.” the study found. “During the same period, stock prices increased by an average of 61.4% among the Fortune 500 companies headquartered in Colorado.”
It remains uncertain how many closed businesses will remain closed permanently, how many new ones will replace those that failed, and whether more closures will occur due to losses from pandemic lockdowns. Following the financial crisis of 2008, business closures did not peak until 2011. The study makes clear, however, that while Colorado’s small businesses shuttered, its wealthiest corporations fared exceedingly well.
Polis mandates burn small businesses
On March 16, 2020, Polis closed bars, in-restaurant dining, theaters, gyms, and casinos. He restricted the workforce of businesses he deemed “non-essential” to 50 percent of staff. By the end of March, the governor ordered all non-essential businesses to close.
In many cases, ulterior motives appear to have influenced a business or industry’s status as essential or non-essential. Unsurprisingly, the “essential” designation applied more often to large corporations and well-connected special interests than to independent small and local businesses. Big-box stores and pot shops enjoyed the “essential business” designation, for example, while downtown clothing boutiques did not.
Of the Fortune 500 companies located in Colorado, nearly all performed functions deemed “essential”. In the few cases where they were not awarded essential status, these titans of commerce could more easily adapt to continue operations.
In contrast, the Independence Institute study highlights one minority couple who poured years of work and their life savings into their small business. They attempted to stay open during the pandemic but faced fines of $15,000 per day for violating lockdown orders. They eventually had to file bankruptcy and lost everything.
“Our American dream was dead because of government policies,” the couple said.
But while one hand taketh away, the other giveth freely. After wreaking havoc on the Colorado economy and causing the closure of thousands of small businesses across the state, Polis has positioned himself to act as the savior of small business.
The arsonist as the firefighter
The governor’s newly released budget for fiscal year 2022-23 proposes over $700 million in new spending to help businesses recover from the pandemic.
“We’ve seen the challenges that the pandemic has exposed…in our small business sector” Polis said in the press release announcing his budget. “My proposed balanced budget aims to build on the foundation that has been laid to help Colorado recover faster and stronger, and ensure that every Coloradan has the opportunity to get ahead.”
Do not be fooled. Governor Polis and the Democrat-controlled legislature had a large hand in creating or exacerbating the struggles Coloradans, and particularly small businesses owners, now face.
When the federal government included tax relief provisions in the CARES Act so that businesses could retain more of their money to meet payroll and pay bills, Democrat legislators in Colorado passed HB20-1420. The bill decoupled the state tax code from those federal provisions, preventing businesses from receiving that tax relief at the state level.
The legislature used some of that money taken from businesses to extend tax credits to illegal immigrants in the state. They pocketed the rest.
Now, after denying these businesses tax relief at the height of the pandemic when they most needed it, Polis’ budget proposes to fund government programs to help businesses “recover faster and stronger.”
The proposal includes $2.5 million for the Colorado Equity Office, a new state agency created to further “equity, diversity and inclusion efforts throughout the state.” This agency seems more likely to create yet another layer of red tape for businesses than to help them recover.
The budget also proposes “$104 million in fee relief for individuals and businesses.” It would have been appropriate for Polis’ press secretary to include “Let them eat cake!” in the press release. This paltry sum will hardly make a dent in the nearly $4 billion dollars in new government fees created this year without voter consent.
A large portion of the proposed “fee relief” is intended to reduce payroll taxes. But Colorado had no state-level payroll taxes a year ago. We do now, thanks to a Democrat-backed ballot measure that the nonpartisan Common Sense Institute estimates will cost employers over $1.3 billion dollars per year by 2025.
While Polis himself did not publicly support the measure, he did not lift a finger to oppose it either. One wonders whether the bailout would now be necessary had he warned the public before last year’s vote on the measure about the burden these payroll taxes would impose on businesses.
The proposed budget also includes fee relief “making it free to start a business.” This should come in handy for businesses that went under due to the governor’s mandates and now want to reopen.
More government not the solution
The recent economic study shows that policies from Governor Polis and other Colorado Democrats have devastated the state’s small businesses. Now they want to use your money to run their government programs aimed at solving the problems they created — or at least exacerbated. It’s like a statewide version of Stockholm Syndrome.
Businesses do not need more government intervention; they need government to get out of the way. If Polis and the legislature want to help, they can stop meddling, stop spending, and let Coloradans keep more of their own money so they have the resources to clean up the rubble left behind by big government’s wrecking ball.
Ben Murrey is fiscal policy director at the Independence Institute, a free market think tank in Denver.
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