Colorado voters will decide in November whether to approve a 10-year plan to rein in skyrocketing property taxes, as well as whether the state should distribute about $2 billion in Taxpayer’s Bill of Rights refunds checks next year in equal amounts rather than linking their size to people’s income level, with more money being sent to higher earners.
The questions were placed on the November ballot Monday by Democrats in the Colorado legislature as the General Assembly wrapped up its 120-day lawmaking term. The legislature worked until about 10 p.m., shy of the 11:59 p.m. deadline when the Capitol carriage turns back into a pumpkin each year.
The last few hours of the session were chaotic, with Republicans walking out of the House chamber in protest, Democrats in the House lambasting each other and the Senate limiting debate to stop a GOP filibuster.
The property tax plan, pushed for by Gov. Jared Polis, will appear on the ballot as Proposition HH and would work by tamping down the effect of rising residential and commercial property values on the tax burden for homeowners and businesses.
Here’s how it would work for residential property:
- The residential assessment rate would be reduced to 6.7% from 6.765% in 2023, for taxes owed in 2024, and to 6.7% from 6.976% for taxes owed in 2025. The 6.7% rate would remain unchanged through the 2032 tax year, for taxes owed in 2033.
- In addition to the assessment rate cuts, residential property owners would get to exempt the first $50,000 of their home’s value from taxation for the 2023 tax year, a $10,000 increase made through an amendment adopted Monday. Residential property owners would then get to exempt $40,000 of their homes’ values from taxation for the 2024 tax year. The break would persist until the 2032 tax year, except for people’s second or subsequent single-family homes, like rental or vacation properties, which would stop being subject to that benefit in the 2025 tax year.
Here’s how it work for commercial property:
- For commercial properties, the assessment rate would be reduced to 27.85% through 2026, down from 29%. The state would be required to evaluate economic conditions to determine if the rate reduction should continue. If the rate reductions persist, the commercial assessment rate would be reduced to 27.65% in 2027, 26.9% in 2029 and 25.9% starting in 2031.
- For agricultural properties and properties used for renewable energy, the assessment rate would be reduced to 26.4% from 29% through the 2032 tax year. For properties that fall under both classifications, such as those used for agrivoltaics, the rate would be cut to 21.9%.
Property taxes in Colorado are calculated by multiplying the statewide assessment rate by the value of a property — sometimes referred to as a market value — as determined by a county assessor. That number is then multiplied by the local mill levy rate.
(A mill is a $1 payment on every $1,000 of assessed value. So in order to figure out what your tax bill is you should multiply your mill levy rate by 0.001 and then multiply that number by the product of multiplying your property’s value by the statewide assessment rate. That’s how much you owe.)
So someone who owns a home valued at $600,000 and assessed at a 6.765% statewide residential assessment rate in a place where the mill levy rate is 75 would owe $3,044.25 in taxes each year. The formula to get to that number looks like this: $600,000 x 0.06765 x (75 x 0.001) = $3,044.25.
The proposal would also prevent many local taxing districts from collecting an increase in property taxes above the rate of inflation, though school districts would be exempt and local governments could override the cap after giving notice to property owners.
Utah has a similar system, and that’s what the provision in the Colorado proposal is modeled after.
To account for the cuts, the legislature is planning to spend $200 million to repay local governments, including schools, for the revenue they would have collected. Additionally, the plan calls for using about $250 million of the $2.7 billion Colorado is projected to collect in the current fiscal year, which ends June 30, above Taxpayer’s Bill or Rights cap on government growth and spending, to further account for local districts’ revenue reduction.
Additionally, voters would be asked in November to increase the TABOR cap, which is calculated by annual growth in population and inflation, by an extra 1%. (Any money collected over the cap has to be refunded.)
The change would reduce the amount of money available for refunds in years in which the cap is exceeded.
Finally, Proposition HH would set aside about $20 million each year to go toward a state renter relief program — a late addition to the measure aimed at acknowledging the proposal mostly benefits property owners.
Proposition HH was placed on the ballot through the passage of Senate Bill 303, which was introduced a week ago. It passed the House on Monday by a 39-7 vote with 19 absent.
All 19 Republicans in the chamber were marked absent after they walked out of the chamber in protest as the vote was being taken and after Democrats shut down debate on the measure. Republicans are in a super minority in the House, so Democrats still had a quorum in their absence.
“Our citizens are really smart,” said Rep. Lisa Frizell, R-Castle Rock. “They understand that this proposal, this bill is a grand effort to get rid of TABOR and their TABOR refunds.”
Rep. Mike Weissman, an Aurora Democrat and a lead sponsor of Senate Bill 303, said Colorado voters would ultimately decide whether they like the proposal.
“We don’t make the final call,” he said. “The voters do.”
When the bill moved to the Senate for final approval, Sen. Barbara Kirkmeyer, R-Brighton, filibustered the measure for an hour before the Democratic majority cut her off at about 9:15 p.m. by voting to limit debate.
The measure passed on a 23-12, party-line vote and now awaits the governor’s signature after Senate Minority Leader Paul Lundeen, R-Monument, asked the governor to call a special session to take another stab at property tax relief in a way that doesn’t affect TABOR refunds.
Separately, the legislature Monday passed House Bill 1311, which would distribute more than $2 billion in TABOR refunds next year to Coloradans through flat-rate checks of roughly $650 or $1,300, depending on whether someone is a single or joint tax filer.
The change would mean the lowest income Coloradans receive nearly $200 more than they were projected to get under the default system, while the state’s highest earners would get hundreds — if not more than 1,500 — dollars less.
The measure was introduced on Saturday — the last possible day it could have been introduced in order to have the three calendar days needed to pass. It cleared the Senate on Monday on a 23-12 vote and was sent to Polis to be signed into law.
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The measure only goes into effect, however, if Proposition HH passes.
If Proposition HH fails, the money will be distributed through the default six-tier sales tax mechanism, adopted by a Republican legislature in 1999. The six-tier system refunds TABOR excess to Coloradans depending on which of six income tiers they fall into, with higher earners getting larger refunds and lower earners receiving less.
Republicans, who are in the Capitol minority, fought Senate Bill 303 and House Bill 1311 and complained that they didn’t have enough time to vet the legislation because of how late in the lawmaking term the measures were introduced.
However, the GOP was unable to stop or force big changes to either measure because of their large political disadvantage in the House and Senate.
The 2024 legislative session begins in early January 2024.