Colorado’s Democrats are officially working overtime this holiday season to … brace yourselves … lower taxes.
No, hell hasn’t frozen over.
Rather, Gov. Jared Polis, a Democrat, recognizes that voters trusted both Republicans and Democrats in 2020. Failure to reduce property taxes in the face of this unsustainable increase is a betrayal of that trust. He called lawmakers back for a special session to act quickly before tax bills are set for March.
Three years ago, Coloradans supported Amendment B voluntarily giving up the only thing insulating Colorado homeowners from the crushing housing inflation — the Gallagher Amendment. Inflation in home prices leads to higher home values which, in turn, increase property taxes. The amendment kept property taxes low for homeowners by ratcheting down the residential assessment rate while holding the commercial assessment rate the same. Without the amendment in place, property taxes are set to increase by as much as 40% in some communities when tax bills arrive in March.
Luckily, a fair number of Republicans in the General Assembly helped approve the resolution asking voters to repeal the Gallagher Amendment with Amendment B. The campaign promised future help for taxpayers. The onus of action is shared by a broad bipartisan segment of lawmakers.
We expect support to emerge for a stop-gap solution to this crisis when lawmakers convene Friday for the special legislative session. The session is expected to last only three days, which means lawmakers are working out the details of a proposal now, behind closed doors, and will unveil it to the public in a much accelerated public forum over the course of three days.
Some Democrats have questioned the need for property tax relief given the state has some of the lowest property taxes in the nation. The argument looks like this: homeowners are generally more financially secure than other Coloradans and giving them a tax break now, especially when Colorado’s schools are still underfunded, should not be a priority.
We argue that keeping middle-class Coloradans in homes that they purchased when homes were half the price of today’s market should be a top priority for lawmakers. Most homeowners are not in multi-million-dollar mansions and many are struggling to afford a home in today’s economy. Unable to move because interest rates have soared and closing costs take such a chunk of equity that an average of about $30,000 cash is required for a lateral housing move, homeowners have hunkered down, attempting to float with the market.
Maintaining existing affordable housing means keeping homeowners in their legacy affordable homes, which are often no longer affordable even for the upper-middle class.
Republicans, having run the campaign to tank Proposition HH at the ballot box this month, have their own compromises to make.
One aspect of Proposition HH was to provide greater tax relief to lower-income Coloradans, a nod to the fact that renters receive little direct benefit from the property tax reduction, by giving out TABOR refunds on a per-capita basis (each Colorado taxpayer gets the same amount and those married filing jointly get double). Using the tax refunds required by the Taxpayer’s Bill of Rights to provide more of a tax break to lower-income folks would pair nicely with legislation reducing property taxes.
In exchange, Republicans can demand that the money the state will legally owe schools due to the property tax decrease come from the general fund. The money is there, depending on how large the property tax reduction is, but unfortunately, it will mean schools will not see an increase in state revenue that was proposed by Gov. Jared Polis in his preliminary budget proposal. Instead of using that money to increase state funding for schools, lawmakers will have to use that money to hold local funding for schools steady. Again, Proposition HH offered a better solution to this problem by proposing a reduction in TABOR refunds so the state could do both for Colorado students.
Finally, Republicans can support bigger property tax reductions for seniors (increasing the Homestead Exemption and making it portable for seniors who move to downsize) and targeting the reduction to primary residences, refusing to let second-homes often owned by out-of-state millionaires in our mountain towns receive the full effect of a reduction.
Polis has a tough road ahead selling both sides on such a plan, but a bipartisan coalition of lawmakers can put aside their disagreements to bring fair and necessary property tax relief to this state.
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