The future of Colorado’s property tax structure — and the way to pay for it — entered a new phase Wednesday with Gov. Jared Polis signing into law a set of bills that aim to blunt the sharpest tax increases associated with rising property values.
Standing in the front yard of a Commerce City home, Polis and bill sponsors, all Democrats, touted the multi-pronged effort that would alter the formula used to establish how much-assessed value affects owed property taxes and, according to their projections, save owners hundreds of dollars in money they’d otherwise owe while also changing tax refunds the state’s tax collection cap.
But as the governor sat down to give the bills his signature, he noted this was just him doing his part — the next step is voters doing theirs. The proposals laid out in SB23-303 only go into effect if voters approve the measure, Proposition HH, this November. If approved, it would allow property owners to deduct $50,000 from their property’s value and lowers the percentage used in calculating how much is owed. Proponents say it would save most homeowners hundreds of dollars per year in money they’d otherwise owe. Their tax bill will likely still increase, but not as dramatically as they would otherwise. It would also expand the senior homestead exemption and allow those who qualify to keep it even if they move to a different home.
The measure would also raise the amount of tax dollars the state can keep under the Taxpayer’s Bill of Rights, or TABOR, to backfill money local governments would otherwise miss out on, as well as set money aside for the state education fund and a rental assistance program. The proposal was introduced in the waning days of the most recent legislative session as assessors warned of steep increases in home valuations that would likely lead to spikes in property taxes owed.
“Because of the very strong economy and very strong TABOR surplus, we are able to do both, we are able to not jeopardize or cut funding for our schools and provide important property tax relief today,” Polis said at the bill signing.
While not explicitly part of the bill signing package Wednesday, voters will also receive an equal refund of surplus TABOR dollars if they approve Proposition HH this November, versus a default mechanism that distributes it based on income. A flat refund equal to $661 per taxpayer would be a net increase in how much TABOR money most Coloradans get back, according to a fiscal analysis of the proposal. Polis signed the measure administratively later Wednesday.
That provision has faced criticism as an attempt to coerce Coloradans into voting yes on the property tax measure, even if they don’t own property, and potentially giving up a portion of their future TABOR rebates to pay for property tax relief. The flat rebate mechanism would only apply for one year, while the property tax portion would apply for a decade. State Rep. Chris deGruy Kennedy, a Lakewood Democrat who helped steward this proposal through, has promised to bring forward a bill to make the flat refund permanent in the next legislative session.
In his signing statement about flat TABOR refunds, Polis said he supports it as a one-time repeat after using a similar flat-refund mechanism last year. Any longer-term change to refund distribution must include income tax reduction and “at the very least bringing back the temporary rate reduction mechanism.” Cuts to Colorado’s already flat income tax rate is largely seen as regressive, with wealthier Coloradans seeing more of the benefits. However, Polis has framed the income tax as being a penalty on people earning money and argued previously that it should be zero.
Proposition HH has also faced criticism that it’s a run around on TABOR limits in general for tweaking the formula used to set the limit on state tax revenue. Currently, it caps revenue growth based on population growth and inflation; the new proposal, if approved, would allow additional growth of 1% per year. Proponents argue it’s necessary to keep local service afloat — and use it to contrast against competing proposals that may be on the ballot to just outright cap property tax collections.
“That is the revenue that goes to support fire districts, to support libraries, to support schools,” Senate President Steve Fenberg, a Boulder Democrat, said. ” And that’s a core part of making sure that we do this responsibly, rather than just saying property taxes are too damn high, so let’s cut them and not think about the impact that has downstream to our local services.”
As Polis held the signing ceremony Wednesday morning, the conservative advocacy group Advance Colorado announced a dozen county governments and more individual local elected officials had joined its lawsuit challenging the proposal. Advance Colorado is also working on various measures to cap property taxes, though they haven’t been approved for signature gathering. The lawsuit argues the bill setting up the proposition violates Colorado’s single-subject rule by including too many distinct topics. Some opponents framed it as the state trying to circumvent TABOR caps with confusing language.
“SB23-303 and proposition HH is obviously a way for politicians to circumvent and destroy TABOR. We hope that the people will see that TABOR is intended to protect the people of Colorado and HB23-303 in conjunction with proposition HH is a way for politicians to destroy what was put in place with TABOR,” Washington County Commissioner Kent Vance, a Republican, said in announcing his county joined the challenge.
Lawmakers at the bill signing said they hadn’t seen the most recent challenge or bevy of local governments joining it, but none treated it with concern. When the lawsuit was introduced last week, Fenberg responded that “it’s unfortunate that Republican special interest groups are trying to prevent Coloradans from lowering their property taxes.”
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