It’s election season once again, and this year we have a big decision.
Proposition HH is by far one of the most complex tax proposals voters have been handed in a while. It’s long, complicated and chock-full of what-if scenarios. In short, it’s a beast.
This has made Proposition HH ripe for party politics. On the one hand, you’ve got Colorado Republicans straight-up lying. Per usual they are fearmongering with claims that HH will eliminate TABOR (it doesn’t) and give the state endless spending powers (it doesn’t).
On the other hand, Colorado Democrats appear to be living in La La Land. In their rosy depictions, they make sweeping claims that HH will avoid catastrophe, has “life-changing benefits” and helps everyone, even when it blatantly doesn’t.
These kinds of polarized narratives are a disservice to the public. So let me give it to you straight: After weeks of digging into state tax policy, Proposition HH remains as clear as mud.
To be sure, I understand what Proposition HH would do. It would reduce property taxes for homeowners and businesses while slightly raising the TABOR cap to help offset lost funds. In the end, homeowners pay less, education is funded and everyone’s TABOR refunds are reduced some over the course of a decade.
Except it’s not actually that simple.
When people say the devil is in the details, they mean it, and Proposition HH has an awful lot of details. It’s here that HH as written creates substantial and potentially lasting tax inequity.
Making clear winners and losers in tax policy is risky and unfair — especially when it’s not obvious to voters what they’re getting. For example, under fiscal modeling that assumes the average historical growth with a recession, “the average taxpayer in the average valued home in Colorado stands to save $4,455 over the decade from Proposition HH. This includes $4,872 in property tax savings and $417 less in TABOR rebates over the decade.
“Under a non-recession scenario, which assumes revenues grow consistently throughout the decade, the average taxpayer would receive $4,872 in property tax savings and $2,190 less in TABOR rebates for a net savings of $2,682. In this scenario, taxpayers can still expect to receive $4,950 in TABOR rebates ($9,900 for joint filers) over the decade.”
So for the average homeowner, both scenarios are a win.
But what about non-homeowners?
Obviously, non-homeowners can’t get property tax relief. Yet as the TABOR cap increase applies to all taxpayers, non-homeowners still acquire reduced TABOR refunds after the first year. According to the projections above, this could range from $417 to $2,190 less in refunds over the next decade.
The difference is that, unlike homeowners, non-homeowners aren’t guaranteed any savings via other tax relief to offset that loss equally. In other words, while homeowners get a clear win in either fiscal scenario, non-homeowners get a clear loss in both.
Now, you might think that if homeowners get reduced property taxes then renters might save money by avoiding a rent increase. Maybe, but there’s no guarantee, and even the Bell Policy Center acknowledges that renters rarely receive pass-throughs on property tax savings. Rather they always get charged during price hikes. And even if a renter has a landlord who would pass on full savings, Proposition HH has another tiny detail that threatens how much renters can save in proportion to homeowners.
While initially all homeowners are offered property tax relief equally, after 2025, only primary residents and multifamily homeowners continue to receive property tax savings at the same rate. At this time, owners of single-family properties that are not used as a primary residence will see their savings slightly reduced. So the amount a landlord can choose to offset any tax savings still isn’t as big as the discount to primary resident homeowners, increasing the likelihood that renters will disproportionately pay into the increased TABOR cap.
Oh, and that renter’s assistance fund Proposition HH proponents love to promote? It’s kind of a math joke. Sure, up to $20 million each year can be put into affordable housing, but the language caps renter’s assistance at a finite dollar amount, not by percentage. So no matter how much fiscal growth is seen, the amount put toward affordable housing remains the same, making the first year maybe 1/8th of the increased cap, and a decade out it’s as little as potentially 1/110th.
This isn’t the only equity issue in Proposition HH. In addition to likely financial impacts for renters, homeowners are disproportionately white, wealthy and older. This means that HH not only skews savings disproportionately toward privileged demographics, but it is likely to exacerbate the gaps, even though HH does offer stronger property tax relief to low- and middle-income families.
Two additional details tucked into HH are likely to worsen these inequities. First, HH provides an expansion of the senior homestead provision to allow seniors who already qualify for the program to sell their current house and transfer the property tax savings to their new home with little regard for the immense amount of home equity gained over the minimum 10-year prior residency. And while some seniors might genuinely need such tax assistance, others definitely don’t, with the program at large already having been linked to deep systemic inequity between races and poverty levels. Proposition HH doesn’t help fix this, and if anything, it probably hurts.
Second, the flattened TABOR refunds Coloradans have recently enjoyed are only set to apply to the first year HH takes effect. After that, TABOR refunds revert back to income-based recovery, meaning low- to middle-income folks will see a drop in both overall TABOR refunds from the expanded cap and a drop in TABOR refunds due to the quick removal of refund flattening. At the same time, high-income earners will go back to getting more money back, again expanding the wealth gap.
It’s worth noting that TABOR refunds aren’t set to be flattened this year without Proposition HH, so there’s still a small gain of about a couple hundred dollars for low- and middle-income earners this year in passing HH. But does that offset the potential losses, particularly for renters? Probably not.
Also, as a matter of general tax policy, I don’t oppose raising the TABOR cap to increase funding for education and other public services — and education is set to potentially win big under Proposition HH, which is enticing. Still, I don’t love that local governments could lose funds overall, especially after reimbursement rates drop partly into HH.
I have a big problem with a tax policy such as HH that in essence asks those with lower wealth and equity to disproportionately fund the bump. That’s a recipe for disaster, and it’s no surprise that one look at who sponsored these bills proves Democrats failed to sufficiently consider tax equity as a core principle in the pursuit of helping homeowners. Talk about missed opportunities.
It’s also worth noting that Colorado homeowners aren’t exactly being asked to pay an unfair share when you look nationwide. For years, Colorado has boasted exceptionally low property taxes, and the recent property tax increases still only place us just above the national average. This moves us from being one of the least tax-burdened states overall to a near-perfect average of 24th in the nation. So while I get that the tax spikes seem high, compared to most places, it’s actually very reasonable.
Of course, the problem is that the property tax rates jumped too quickly all at once, leaving homeowners in sticker shock and some financially vulnerable, especially with overall inflation. This is what causes my biggest frustration with HH: If we pass it, we are likely to acquire deep systemic inequities in our tax structure for up to a decade or more. But if we don’t pass HH, some vulnerable homeowners won’t get the help they desperately need. So who wins?
It’s for this reason that my primary takeaway on Proposition HH is to shake my fists in the air and wonder what in the heck Gov. Jared Polis and the Democrats were thinking in offering up such a complex and inequitable tax solution to voters without any reasonable alternatives on the horizon. As written, there appear to be clear winners and losers whether we pass it or not. How are voters supposed to pick?
So should you vote yes or no on Proposition HH? After countless hours spent reviewing the details, the honest answer is: I don’t know. I suppose it depends on whether you’re likely to be one of the winners or losers, and whether you have the individual luxury of withstanding a personal loss to stand on principle. I’m not sure I do, and given homeowners outnumber renters, Proposition HH might be the ugly baby we all need to learn to love next year.
Either way, keep your proverbial pitchforks handy. Colorado’s housing fights won’t be over anytime soon.
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