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“Fees” vs. “taxes” – what’s the difference?

The Castle Pines Connection recently published an article on our website regarding franchise fee agreements between the city of Castle Pines North (CPN) and local utility providers, causing residents to take a closer look at their utility bills and make note of these additional fees. One Castle Pines North resident wrote in and stated, “My checkbook cannot tell the difference between a tax and a fee; it is money out of my pocket either way.”

So what really is the difference between a tax and a fee? The abridged, layman’s version is that taxes are paid in exchange for government services that are supposed to help everyone, whether you choose to receive the benefit or not. Fees, on the other hand, are paid in exchange for services that directly help a specific person, and you have a choice whether or not to participate in that service (cable TV, for example).

The other major difference is that, unlike a tax, the discussions and negotiations for franchise fees are done behind closed doors with the utility providers and city officials, and do not require approval of its citizens. Colorado State Statute (TABOR*) requires taxes to be voted on and approved by the people.

Whether it is called a fee or a tax, and whether citizens pay it to a utility provider or directly to the city, it is ultimately the city collecting revenue to be used to provide necessary services for the city of CPN, and residents paying the bill.

Editors note: TABOR is a set of constitutional provisions Colorado voters adopted in 1992 to limit revenue growth for state and local governments in Colorado and to require that any tax increase in any state or local government (counties, cities, towns, school districts and special districts) must be approved by the voters of the affected government.



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