Meanwhile, education groups and advocates for the developmentally disabled and low-income people who rely on government programs are urging lawmakers to pass the tax increases - which the full Senate began debating Friday - and avoid teacher layoffs and cuts to safety net spending.

In the middle are lawmakers who must find a way to close a $1.5 billion shortfall in this year and next year's budget, and Republicans and Democrats are sharply divided on how to do that.

Democratic Gov. Bill Ritter proposed ending or suspending 13 tax credits and sales tax exemptions to raise about $125 million next year, and majority Democrats have been backing that plan in the Legislature. Republicans say they want Ritter to cut more, pointing out that most of the budget balancing during the recession has involved one-time fixes rather than reduced spending.

The biggest tax increase on the table would affect manufacturers like the Evraz Rocky Mountain Steel plant in Pueblo. The state doesn't charge 2.9 percent sales tax on the energy used by such plants now. Under Ritter's proposal, such plants would pay the tax for three years, raising about $33 million a year.

Evraz - the state's largest energy user after utilities - says its energy bill would rise $2 million a year as a result, which could force it to cut 30 to 120 jobs. The plant has 1,000 employees.

The workers at risk are in the division that makes steel used in tires, rebar and chain link fences. It's the part that's most vulnerable to foreign competition and has seen numerous layoffs and reduced hours in the past two years.

Ben Lutze, the plant's business director, said the division has enough work now but layoffs could be possible in the next six months if the tax increase is approved.

"My fear is that looking at the past two years, that it is going to cause us to make some real tough decisions," he said.

The Pepsi Bottling Group, meanwhile, estimates that charging sales tax on soda would lead to a 1.9 percent to 2.8 percent drop in sales. That could lead to the loss of 370 to 800 jobs, mostly at stores and vending machine companies, it said.

School districts and the teachers union say not moving ahead with the tax increases could mean thousands of teachers could lose their jobs and some smaller districts may have to close.

Ritter has already proposed a $260 million cut for kindergarten through 12th grade schools. The Colorado Education Association projects that could cause the loss of 5,200 teaching and professional support jobs like counselors, about a tenth of existing positions. Failing to pass the tax hikes could mean another $132 million cut and the potential loss of another 2,600 such jobs.

Littleton Public Schools in suburban Denver, for example, is so far considering cutting 100 full-time positions next year, district spokeswoman Diane Leiker said.

Members of each party believe the other is exaggerating the impact of the potential cuts and tax increases.

Sen. Greg Brophy, R-Wray, compared the prospect of teacher layoffs to the federal government's threat of closing the Washington Monument to get the budget passed. He said government needs to make fundamental changes to live within its means and do more with less during the recession, including laying off state "bureaucrats."

Sen. Evie Hudak, D-Westminster, thinks people will continue to buy soda, candy and steel despite the sales tax. She said there's no reason to exempt industry from paying a tax on fuel just like households do.

Hudak, who listened to testimony from steel workers and the online business owners until after midnight Friday, said lawmakers have to look at the big picture and not just the impact to those people came to the Capitol to fight the increases.

"There are lots of faces in hospital rooms, in bedrooms and on the street who aren't here and need our help even more," Hudak said.

(Copyright 2010 by The Associated Press. All Rights Reserved.)