Miller Hudson

Miller Hudson

As we age, we are less likely to play Jenga. It’s the kids’ game where a group takes turns pulling blocks from a stack until a fatal attempt collapses the entire tower. Jenga rewards undivided focus, eye-hand coordination and a rudimentary understanding of gravity and structural integrity. Once you touch a block you must either proceed to remove it or waive your turn. I direct attention to this pastime in the context of the Gallagher Amendment repeal appearing as Amendment B on this November’s ballot.

By way of background it’s important to recall that Gallagher was not a discrete, stand-alone amendment to the Colorado Constitution but a legislative amendment to a larger property tax reform package forwarded to the ballot in 1982. Proposition 13 was approved the year before in California, capping property taxes at 1% of assessed valuation while freezing the sale assessment until resold. The market value of homes could and did explode in Silicon Valley, where the average price for a tidy bungalow runs into the millions and property taxes remain at their 1982 appraisal levels for continuous residents. Consequently, taxes for identical adjoining properties can vary by a 1,000% or more. As you might imagine, this provision has discombobulated both state and local budgeting in California.

Doug Bruce, a soon-to-arrive California transplant, had not yet surfaced to roil Colorado’s fiscal waters, but Republican leadership at the Capitol still fretted that an insurrection mimicking the Golden State was possible. They were determined to send a package of tax restrictions to voters that could keep the state’s pitchforks safely behind barn doors. Since a referred measure requires a two-thirds approval from legislators in both the Senate and House, this put the Democrats in the driver’s seat where they could bargain for populist concessions targeting homeowners and renters.

Senate Minority Leader Ron Stewart from Boulder, with Sens. Barbara Holme and Dennis Gallagher of Denver, prepared nearly two dozen amendments to the leadership’s reform bundle. These were distributed amongst this Democratic troika for floor debate, where the sole survivor — requiring a freezing of the existing balance of property tax collections at 45% for residential and 55% for commercial properties — was offered by Dennis Gallagher. It was presumed local governments, which are highly dependent on property tax revenues, would retain full authority to adjust mill levels as needed. Overlooked was the uneven distribution of commercial properties statewide.

There were two major flaws inherent to this approach. The first was an assumption that the relative proportions between property values would remain static. Instead, residential property values have exponentially outstripped commercial values, driving their assessment rate down by 65%. Over time this trend has, indeed, saved homeowners an estimated $35 billion in property taxes. The second conceptual flaw was placing these fiscal rules into the constitution, which placed every unit of state and local government into an economic chokehold despite dramatic economic changes.

These mistakes were aggravated following voter approval of the TABOR amendment in 1992. The unanticipated interaction between Gallagher and TABOR has gradually tightened the Gordian Knot of competing budget constraints that annually flummox the Colorado legislature. In a surprise move during the recently concluded session, a bi-partisan coalition casting about for any kind of revenue relief got behind the repeal of the Gallagher Amendment. Twenty years ago, when this was last attempted, voters rejected the proposition by nearly a 3-to-1 margin. Nonetheless, two-thirds of 2019 legislators in each chamber, this time with Democratic majorities, again referred repeal to voters.

Supporters of the Gallagher repeal constitute an odd coalition of rural Republicans whose constituents are experiencing the gravest depredations against their public services and urban Democrats desperate for fiscal wiggle room to raise additional revenue. Make no mistake about it, if the current property tax system is moved into statute, a legislative rugby scrum for dollars will ensue among competing economic interests. I have considerable sympathy for the bi-partisan advocates supporting repeal on the grounds that any relaxation of fiscal constraints is a step in the right direction. I also understand the equally surprising alliance between left-liberals and reactionary tax opponents who share a fear that repeal will predictably harm Colorado families — stripping the one tax provision protecting them against unwarranted shifts in tax burdens benefitting justly aggrieved commercial property owners.

As long as TABOR remains embedded in our constitution, however, I worry the unpredictable consequences from torpedoing Gallagher. Just as in a turn at Jenga, accidentally collapsing the state’s fiscal structure could force a tax policy restart for Colorado — this outcome feels like an inadvisable risk in the face of COVID-19, economic turmoil and multiple impending crises. It’s long past time to return fiscal policy flexibility to our elected representatives. Yet, without a coordinated and comprehensive program, I will remain a no vote on repeal.

Miller Hudson is a public affairs consultant and a former Colorado legislator.

Miller Hudson is a public affairs consultant and a former Colorado legislator.

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