Aurora and Denver look to ban taxing government fees

Some call it "double taxation."

Now, Denver and Aurora are taking up ordinances to exempt government fees -- such as plastic bags fees -- from taxation.

While the individual fees may be small, they add up fast. The latest fee -- 27 cents on anything you get delivered -- is expected to generate $76 million in state revenue the first year alone. But, it's also a local revenue generator for some cities that are taxing the fee to the tune of hundreds of thousands of dollars more.

Since the Taxpayer Bill of Rights, or TABOR, was passed -- requiring tax increases be approved by voters -- elected officials have looked more and more to fees as a way of funding government. Common Sense Institute found $26 billion -- or 40% of all state funding -- now comes from fees. That's up from $742 million in 1994 when TABOR went into effect.

"You hear a lot these days from elected officials, at the local, federal, and state level, talking about the need to save people money, lower costs, and these fees are doing the exact opposite," said Aurora City Councilman Dustin Zvonek, who has introduced an ordinance to exempt all government fees from municipal sales tax.

In addition to the retail delivery fee, Aurora has a waste tire fee, and together, Zvonek says, they'll generate about $250,000 this year in tax revenue, which he calls "Not an insignificant amount of money."

Denver also plans to exempt the state retail delivery fee along with the city's plastic bag fee from its municipal sales tax, according to City Treasurer Steve Ellington.

"We worked with the administration to make sure we're doing what's in the best interest of Denver residents."

The bag fee alone generated nearly $1.8 million the first year and was taxed at 4.8 percent, which Ellington notes is less than a penny a bag.

"On each little one it's not that much but when they're take together, it gives us an opportunity to provide some savings and benefit to Denver residents."

Ellington says it appears Denver is only taxing the plastic bag and delivery fees but he's still looking into it.

Aurora has identified three fees - bag, delivery and waste tire - that it taxes but it's ordinance exempts all government fees from taxation.

Zvonek hopes other cities will follow Aurora's lead, "As the amount of revenue local governments were generating as result of taxing this fee increases, it would have been harder to get rid of in the future."

The Colorado Municipal League is trying to get a handle on how many cities besides Aurora are taxing fees. It says 69 cities self-collect local taxes like Aurora and Denver.