The failure of Proposition HH on Tuesday has big implications for every Coloradan.
Property taxes due in April will rise by an average of 40% across the state without swift legislative or local government intervention. And people who make less than $99,000 will get a smaller refund next year under the Taxpayer’s Bill of Rights than they would have had Proposition HH passed.
Here’s a closer look at how the measure’s failure will affect your wallet:
Absent government intervention, your tax bill will rise in 2023, 2024 and 2025
If the legislature and local governments don’t act, which seems unlikely, the 40% median jump in home values across the state will correspond to an equivalent increase in people’s property tax bills next year.
Absent government intervention, taxes will go up again in the 2024 tax year for taxes due in 2025. That’s because the statewide assessment rate for homes is set to rise to 6.976% from 6.765% as a temporary property tax relief law passed by state lawmakers in 2022 winds down.
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That may seem like a small change, but it can result in an increase of hundreds of dollars on someone’s tax bill. Colorado property taxes, which are collected on the local level and fund services like schools, fire districts and parks, are calculated by multiplying the statewide assessment rate by the value of a property as determined by a county assessor. That number is then multiplied by the local mill levy rate.
Also, a provision in the 2022 relief measure that waives the first $15,000 in taxable value for homes in the 2023 tax year goes away in 2024, which will cause homeowners’ and businesses’ tax burden to increase even more.
The statewide residential assessment rate is then supposed to rise again in the 2025 tax year and for subsequent tax years to 7.15%. Moreover, home values will be reassessed that year, capturing what’s expected to be another two years of housing price growth. The every-other-year reassessment cycle in Colorado is what led to this year’s jump in the first place.
Assuming there isn’t a major housing market downturn, that means tax bills due in 2026 and 2027 will go up.
How to calculate your property taxes
A mill is a $1 payment on every $1,000 of assessed value. So 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.
Time is running out for the legislature to reduce taxes due in 2024
The Democratic majority in the legislature has control over the statewide assessment rate and the taxable value exemption, so lawmakers could meet for a special session before the end of the year to tweak those for taxes due next year.
But they’ll have to do so within a matter of weeks so local governments can set their budgets.
Under state law, local officials must set their mill levy rates by Dec. 15 to get tax bills in the mail by January.
The legislature may opt to leave the rates alone for taxes due in 2024 and then address how rates are expected to rise again for taxes due in 2025 and beyond when the General Assembly reconvenes in January for its regular lawmaking term.
For most Coloradans, TABOR refunds will shrink in 2024
TABOR, approved by voters in 1992, limits the annual rate of government growth and spending each year to the increase in inflation and population growth. Any money collected above that cap must be refunded to taxpayers.
What is TABOR?
The Taxpayer’s Bill of Rights, or TABOR, is a 1992 constitutional amendment that requires voter approval for all tax increases in Colorado. It also caps government growth and spending, mandating that tax revenue collected in excess of the cap be refunded to taxpayers. The cap is calculated using inflation and population rates.
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In the 2022-23 fiscal year, which ended June 30, the state collected more than $3.5 billion above the cap — money that will be refunded next year through checks after people file their tax returns.
Proposition HH would have for the second straight year overridden the default refund mechanism in which refunds are distributed through checks whose size are based on six income tiers with lower earners getting less. If Proposition HH had passed, every Colorado taxpayer would receive checks of $832 for one year, regardless of their income. (The amount is doubled for joint tax filers.)
Because Proposition HH failed, people and families who make less than $99,000 — 62% of tax filers — will get a smaller TABOR refund check next year than if the ballot measure had passed.
People who make more than $99,000 will get a bigger refund.
The chart below shows how the failure of Proposition HH affects TABOR refunds due in 2024:
Keep in mind that while Proposition HH would have overridden the default TABOR refund mechanism in 2024, the change would have lasted only one year.
Additionally, the initiative would have reduced everyone’s tax refunds starting in 2025 and beyond because it increased the TABOR cap by 1 percentage point each year, decreasing the amount of money available for refunds.