In a special legislative session that concluded Monday afternoon, the Colorado General Assembly cut property taxes by $434 million and increased taxpayer refunds for most Coloradans by redistributing money that otherwise would’ve gone to higher earners.
They also redirected $185 million in surplus tax collections to expand a tax break for low-income workers, approved $30 million in rental assistance and authorized a summer meals program for low-income children that will bring in up to $42 million in federal funding.
It all happened in a span of four tense days as lawmakers rushed to wrap up before Thanksgiving.
Gov. Jared Polis called the special session earlier this month after voters overwhelmingly rejected Proposition HH, his sprawling tax plan that offered a complicated mix of property tax relief, school spending increases and an overhaul of the state revenue cap under the Taxpayer’s Bill of Rights.
In response, legislative Democrats went back to the drawing board on tax relief, directing more of it to low-income workers over the lock-step opposition of Republicans, but stopping short of any long-term solutions to Colorado’s cost of living crisis. Six of the bills they sent to the governor’s desk make only temporary changes to the state tax code, while a seventh assigns a bipartisan committee to study a more lasting solution.
All of the legislation was signed into law by Monday evening by Polis, whose office was intimately involved in the crafting of policy debated at the Capitol during the special lawmaking term.
Here’s what the legislature did, and what it means.
How much homeowners will save
The average Colorado homeowner will save a little over $200 on their property tax bill due in April. The amount of savings may be higher or lower based on your home’s value and your local mill levy rate.
Democrats used two levers to provide relief. They reduced the residential assessment rate for the 2023 tax year to 6.7% from 6.765%. And they increased the amount of a home’s value that is exempt from taxation to $55,000 from $15,000.
Combined, that represents about an 8% tax cut for a home worth $550,000 — and more cuts are likely on the way. Many local governments will be legally required to cut mill levies due to local limits on revenue as they grapple with the 40% increase in statewide home values.
To be clear: Your property tax bill won’t be lower than it was. The relief lawmakers passed will limit the increase caused by higher property values.
Lawmakers didn’t pass any additional property tax relief for commercial properties.
You can use our calculator below to see how much you will owe in property taxes — and how much you would have owed if the legislature hadn’t acted:
An expansion of a tax credit for the working poor, as well $30M to help renters facing eviction
Democrats tried to help renters in a few ways. But unlike the property tax cuts provided to every homeowner, not all renters will qualify.
The largest relief measure comes through a $185 million expansion of the Earned Income Tax Credit, which primarily benefits low-income working families. Currently, Coloradans receive 25% of the federal tax credit of the same name. The General Assembly doubled it for this tax year only.
That translates to as much as $1,350 more for a family with three children making $25,000.
The federal program is designed to encourage people to work, so it rises over the first $10,000 to $15,000 in income, but falls after a certain point. No one making more than $63,400 is eligible. You can use the calculator found here to determine your federal credit, then divide it by two to determine your state credit for this income tax year.
Democrats also approved up to $30 million in emergency rental assistance for households making up to 80% of the median income for their area. To qualify, renters have to be able to show financial hardship that puts them at risk of eviction.
There’s a deadline to receive help: any money that isn’t distributed to landlords before July 1 will be sent back to the state coffers to spend on other programs.
Higher TABOR refunds for most
Coloradans who make less than $104,000 — the majority of Colorado taxpayers — will get a larger Taxpayer’s Bill of Rights refund next calendar year, while higher earners will get less than they would have otherwise.
That’s because Democrats passed a bill making TABOR refund checks the same for everyone, a temporary change from the usual system, which ties refunds to income, with higher earners getting more.
The refunds are owed for excess revenue collected over the TABOR cap, which is set by annual increases in inflation and population. The state has to refund any money collected over the cap.
The checks will be $800 for single tax filers and $1,600 for joint tax filers.
The refunds would have been $47 larger per person, but lawmakers used $185 million of the state’s $3.6 billion surplus to fund the expansion of the earned income tax credit.
How the legislature is — and isn’t — reimbursing schools and local districts
Schools will be reimbursed for all the money they would have gotten had the legislature not exempted $55,000 of a home’s value from taxation and reduced the residential assessment rate. That totals about $145 million.
Fire, ambulance and hospital districts, like schools, will be reimbursed for all the money they would have collected had lawmakers not passed property tax relief. That totals about $50 million.
Counties, cities and other local agencies like water districts and libraries will only receive state assistance if their local property values are increasing by less than 15%. Even then, the reimbursements may be only partial.
What lawmakers did to plan for future property tax policy
The legislature also formed a bipartisan, 19-member task force to come up with a long-term property tax solution.
The task force will include state lawmakers and local elected officials, as well as representatives from education, firefighting and business advocates. Property owners will also be on the panel.
Appointments to the task force will be made by Dec. 4 and the commission will start meeting the next day. Meetings will continue at least twice a month through at least mid-March, when it is required to present its findings to the governor and the legislature.
The panel is set up with the goal of either passing a long-term property tax solution at the Capitol next year, or crafting a measure to place on the 2024 ballot.
The bill forming the task force was originally drafted to be dominated by Democrats, but it was changed in the Senate to be more politically and geographically diverse. For majority Democrats, it’s a bet on bipartisanship, after a special session that was otherwise deeply divided along party lines. If the plan that comes out of the task force can win some Republican support in the legislature, there may be enough votes in the Capitol to refer a constitutional amendment to next year’s ballot.
Placing a constitutional amendment on the ballot takes the support of two-thirds of the lawmakers in each the House and Senate. Democrats have a supermajority in the House but are one vote shy of that threshold in the Senate.
How the special session affects the state budget picture
Democrats had to scrounge to find funding for their proposals after state budget analysts reported last week that the state could face a shortfall this year.
They got some help from revised property tax forecasts. Local property taxes are now expected to generate $262 million more for schools this year than anticipated, enabling lawmakers to delay a state reimbursement to schools until the 2024-25 budget year, which starts July 1.
If Proposition HH had passed, lawmakers would have been required to spend that money this year.
They also used $15 million in leftover federal stimulus funding to cover half the cost of the additional rental assistance.