Colorado Democrats have hammered out a plan to bring relief to homeowners from unsustainable increases in property taxes — an average of about $1,000 across the state.
What everyone wants to know as the final touches are put on the November ballot question is how will it affect their family budget.
As introduced, lawmakers will be asking voters to approve a 10-year reduction in the state-wide assessment rate for residential property, a one-time reduction in the assessed value of residential property, and a small reduction in income tax refunds that are expected under the state’s Taxpayer’s Bill of Rights. Proponents estimate it will reduce the increase in tax bills by an average of $600.
The TABOR refund dollars — an estimated $50 on average per taxpayer — would be used to backfill the reduction in anticipated revenue that school districts, special districts and metro districts suffer from the changes to the statewide assessment rate. The state has always made schools whole when it tinkers with the assessment rate.
So what is the trade-off for taxpayers? Is this really just a shuffle of money from their left pocket during income tax season to their right pocket during property tax season?
No.
But there are some clear winners — owners of residential property in high tax areas (areas with the highest mill levies for school, city, county, and special districts) will get the most savings.
And there are some clear losers — high-income renters who will see the largest reduction of their TABOR refunds under any reduction of the income tax rate and or through the sales tax rebate method. Because TABOR refunds are dolled out based on how much income tax you pay, higher earners stand to get more money back than lower-income earners. Landlords are unlikely to be influenced by the tax reduction as they set rents based on the market price, although the reduction staves off the likely increase in market price if landlords are responding to an average 33% tax increase.
Housing in this state is already unaffordable and allowing residential property taxes to increase by such a huge margin in a single year would only deepen the crisis for both renters and owners.
Lawmakers must act.
We’d hoped for a simple proposal that capped the amount a property’s assessed value could increase or decrease by in a single year to something reasonable — say 5% to 10%. But Colorado is not a simple state. Too many formulas, like TABOR and Amendment 23, in our government’s finances have gunked up the cogs and led to an underfunding of critical services.
Putting a 10-year sunset on the property tax provisions in the bill is smart. Who knows what the housing market will do in the next decade?
And we have long supported reducing TABOR refunds to fund Colorado’s schools. Lawmakers should double-check the language in the ballot measure to make sure that all the TABOR money will flow to schools and special districts even when it exceeds the backfill amount needed to offset the reduction in property taxes. And we hope that metropolitan districts — which are used by developers to pay for the infrastructure needed for their project and increasingly as a replacement for an HOA — do not get TABOR refund dollars as part of this deal.
If lawmakers put this question before voters in November, Coloradans are going to have to do some complex math to figure out if they will come out ahead or behind with the measure, and ask themselves what is fair when it comes to rising property taxes based on an out-of-control housing market.
That calculation is not going to be clear for many people, and perhaps that’s part of the appeal of structuring the deal in such a complex way.
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