Colorado is on track to become the second state in the nation to prohibit credit card companies from charging “swipe fees” on taxes or tips, following the passage of new legislation in the state House on Wednesday.
Under the current system, every time a customer uses a Visa or Mastercard at a business, the credit card companies impose a fee ranging from 2% to 4% of the total bill. This fee includes charges on sales tax and tips, which businesses collect and pass on to the government and workers, respectively.
The newly passed House Bill 1282 not only prohibits credit card companies from levying fees on taxes or tips but also restricts the fees that can be imposed on charitable donations.
While the bill only addresses a portion of the swipe fees, businesses still face significant costs annually due to charges on taxes and tips, according to supporters.
Representative William Lindstedt of Broomfield, a Democrat and co-sponsor of the bill along with Republican Representative Max Brooks of Castle Rock, emphasized the regressive nature of these fees during the House session. He stressed the importance of safeguarding Colorado’s workers and small businesses.
The measure passed the House with a 43-21 vote, drawing support and opposition from both sides of the aisle. If approved by the state Senate and signed into law by Governor Jared Polis, Colorado will join Illinois as the only states to prohibit fees on taxes or tips.
The issue of fees has sparked sharp divisions among Democrat and Republican lawmakers this session, with the Democratic majority also facing internal disagreements on how to regulate businesses effectively.
Interestingly, the swipe-fees measure has garnered support from various business groups, including the National Federation of Independent Businesses and the Colorado Restaurant Association, as well as the liberal Bell Policy Center.
On the opposing side are major players like Mastercard and American Express, along with business organizations such as the Denver Metro Chamber of Commerce and the Colorado Competitive Council. Several airlines have also voiced opposition, citing concerns about the impact on customer reward programs.
During the committee vote on the bill, critics raised multiple objections and threatened legal action akin to the challenges faced by Illinois’ swipe fee law. They warned of potential disruptions to airline points and online transactions if the bill were to pass.
Despite the opposition’s arguments, supporters of the bill remain steadfast. Representative Brooks dismissed the fears raised by opponents, citing existing fee caps in Europe as evidence that similar limits in Colorado would not be catastrophic.
As the bill advances to the Senate, its fate remains uncertain, with proponents anticipating a fresh wave of intense opposition.
