Polis, legislators push $700 million in property tax relief that taps into TABOR refund | Legislature
Rising property values in Colorado are expected to cost Coloradans about $1.3 billion more in property taxes over the next two years.
Lawmakers, business representatives and the governor’s office have been negotiating on a solution, and on Monday, the governor and some of those involved in the talks rolled out legislation to offer relief to taxpayers.
That solution, Gov. Jared Polis announced in a news conference, would result in Colorado homeowners receiving on average about a $274 property tax refund, based on a home value of $500,000, with more for higher-valued properties. The property tax relief applies to 2023 and 2024.
But it’s not so much a refund, according to Rep. Colin Larson, R-Littleton, who is part of a coalition running a ballot measure that also attempts to provide temporary property tax relief.
Larson told reporters Monday the relief in the legislation unveiled Monday is really just a reduction in the increase in those taxes that’s coming in the next two years, not to mention it is temporary. The revenue mechanism also reduces Coloradans’ Taxpayer’s Bill of Rights refund.
The measure, which was introduced on Monday evening and is scheduled to be heard at 7:30 a.m. Tuesday in the Senate Appropriations Committee, is among a slew of legislation the Democratic majority unveiled in the last several weeks to offer economic relief at a time when Coloradans face record-setting inflation and economic uncertainty, even as the state continues to rebound from COVID-19 pandemic.
Last week, Polis and Democrats Coloradans announced a separate legislation to give Coloradans a $400 refund this summer. That money is not new, however. Under current laws, taxpayers would get their TABOR refund in the spring of 2023. Polis, with backing from legislative leaders, plan to change the schedule by sending the cash to taxpayers in August this year – just a little over two months before the November election and barely a month before big campaign ads will start hitting voters’ phones, social media, mailboxes and TV and computer screens. That led critics to describe the measure as a cynical ploy to court voters in an election year.
In addition, Democrats are also pushing for legislation to create a refundable income tax credit totaling $100 million they say will boost older residents’ income amid rising housing costs, and a bill to delay implementation of a new gas fee and also reduce a vehicle registration fee.
Polis, legislators say Coloradans will get $400 in tax refund this summer
The property tax relief envisioned in the new legislation – which proponents say will cover $700 million of about $1.3 billion in property tax obligations both residential and commercial property owners face – would be paid for with $200 million in one-time general fund money, part of $900 million that the Joint Budget Committee has already banked into the recently-signed Long Appropriations Bill.
Another $200 million would come out of Taxpayer’s Bill of Rights refunds due to taxpayers in 2024 and collected in 2023. That would take roughly $50 from the refund taxpayers could expect in 2024, according to quick calculations by Polis and the bill’s sponsors, Sens. Chris Hansen, D-Denver, Bob Rankin, R-Carbondale, and House Majority Leader Daneya Esgar, D-Pueblo.
The TABOR refund for 2024 – from funds collected in 2023 – is currently projected at $1.6 billion. But that’s assuming the state doesn’t head into a recession that could stall the economic recovery and, in turn reduce, revenues.
Larson argued the bill’s mechanism has never been an allowable way to use TABOR surplus.
“You’re robbing Peter to pay Paul,” he said.
The last $300 million is likely a reduction in property taxes collected by local governments.
Hansen and others said the legislation they propose would deliver relief without affecting local governments.
Actually, the bill would affect local governments, depending on their size and several other factors.
Hansen told Colorado Politics the last $300 million in the bill will be covered through a three-tiered mechanism: small counties that don’t see huge hikes in property valuations will realize and collect the full increase in their property tax revenues; small counties with big hikes in property valuation will receive 90% of their anticipated revenue increases from those property tax hikes; large counties with large valuation increases will get 60% of their anticipate revenue increases.
This means the bulk of that $300 million is paid for by reducing the increase in property tax revenue to primarily the large counties along the Front Range.
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Polis touted the bill as the first significant reduction in commercial property taxes in 40 years, dating back to the passage of the Gallagher amendment that voters repealed in 2020. Under the legislation, assessment rates for homeowners are projected to decrease from 6.95% to 6.765%, while commercial property tax assessment rates would dip from 29% to 27.9%. Property taxes are calculated by multiplying the property’s value by the assessment rate.
A second part of the legislation will continue to allow homeowners to defer up to 4% of property tax increases. A third part will temporarily reduce taxable value by $30,000 for commercial properties and $15,000 for residential properties.
“This is a way to target relief,” Hansen said during Monday’s news conference.
The legislation is a follow-up to a 2021 law that temporarily changed the language around residential and commercial property taxes and which launched the deferral program.
But it also satisfied another goal – an end-run around a ballot measure that critics said would have had a disastrous effect on local government revenues.
That’s also partly the goal of the legislation announced Monday.
The ballot measure, Initiative #75, would limit annual growth in assessed property values for all real and personal property to inflation or 3%, whichever is lower. According to its fiscal analysis, the measure would decrease property tax revenue to local governments statewide by up to an estimated $1.3 billion in budget year 2023-24.
One of the big questions that remains is whether the ballot measure – Larson and Rep. Alex Valdez, D-Denver, are the proponents – will go forward.
Larson had hoped for a middle ground in negotiations with Polis and the sponsors of the property tax bill, but indicated negotiations broke down at the 11th hour.
Both the proponents of the new bill and Colorado Concern, a major backer of the ballot measure, said that without action property taxes will go up. A Colorado Concern report from February estimated those hikes at 20%. The ballot measure, Colorado Concern said, “is meant to balance relief for taxpayers from skyrocketing property tax bills with the needs of local communities that depend on that revenue to fund essential services.”
“By limiting value increases to 3% annually, communities’ tax bases that fund school districts, fire districts, and counties can continue to grow, ensuring long-term viability, and homeowners and businesses are given certainty and protection from unprecedented swings in the marketplace,” the group said in February.
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In response to the property tax bill, Mike Kopp, president & CEO of Colorado Concern, said he ultimately hopes the legislature will confront the property tax challenge and there won’t be a need for the ballot measure.
“We commend the governor and legislators who announced some great steps in the right direction today regarding property tax assessment reforms and reductions in residential and business tax bills,” Kopp said. “While we are eager to get into the details of the proposals, it’s clear that a tremendous stride was taken today.”
Larson believes there’s a chance the ballot measure would continue.
He said the deal that was negotiated was supposed to deliver $700 million in relief to taxpayers. Under that deal, half of the projected $1.3 billion in additional revenue from property taxes increases would go to local governments, the other half to homeowners and commercial building owners. There was also a discussion of a change in assessment rates, Larson said. The last part of the deal involved working in earnest to find a longer-term solution, Larson said.
But the bill, as unveiled, takes money from the TABOR surplus and pays back counties for their revenue losses, Larson noted.
He also called the proposed relief insufficient: “It’s not meaningful relief to someone who’s seeing their property taxes increase by $1,000 in a home they’ve owned for 50 years.”