Polis' property-tax plan will offer little relief | OPINION

This year, a typical homeowner in Colorado is facing at least a $1,000 property tax increase. Friday, Gov. Polis announced a “property tax cut package,” which he hopes to roll out early next week.

If history is any guide, the governor’s plan will provide little to no relief for taxpayers.

The governor has not yet released details of his proposal, but he previewed it late last week in an interview with CPR News. He described two main components.

He proposes exempting part of each home’s value from taxation and reducing the statewide assessment rate. He did not say how long these temporary changes would remain in force.

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This sounds identical to the pseudo-fix lawmakers gave us last year. The one that did so little to help homeowners the legislature is looking to replace it before it takes effect.

Senate Bill 22-238 exempted $15,000 of a home’s value from taxation for tax year 2023. It also reduced the statewide assessment rate from 6.95 percent to 6.765 percent for 2023 and about 6.9 percent for 2024. In 2025, the exemption goes away and the assessment rate returns to 7.15 percent.

This mirrors Polis’ description of this year’s plan exactly. And it clearly fell short of addressing the issue. The governor’s fresh-baked plan looks more like yesterday’s stale toast.

Presumably, the new plan will help property owners by increasing the exemption and rate reduction. But if it is indeed a sequel to SB238, then we can expect more than what the governor told us Friday.

In last year’s bill, most of the property tax relief from the state came out of taxpayer refunds. Colorado’s Taxpayer’s Bill of Rights already requires the state to send this money back to taxpayers. Changing how our constitutionally mandated refunds get to us is not tax relief.

One can safely assume that this year’s proposal will pay for property tax relief using our refunds, too.

Notably, the Joint Budget Committee set aside $150 million from the budget this year. If all that money goes to property tax relief, it would only cover about 5 percent of the tax increase Coloradans face.

But it gets worse. (Stop reading here if you have high blood pressure.)

Until 2020, Coloradans enjoyed a constitutional protection that would have prevented all this. The Gallagher Amendment had problems, and lawmakers should have fixed them. Instead, they terminated the whole amendment with nothing to replace it. They won voter approval for its repeal by wordsmithing the ballot question, making it sound like taxes wouldn’t go up.

We now know the devastating consequences Gallagher’s repeal yields for Colorado homeowners. But Polis, who supported repeal, tells a different story.

During his CPR interview, the governor said about the looming tax increase, “[I]t’s a result of higher home prices.”

That’s not true.

Under Gallagher, assessment rates would have dropped automatically as home values rose, preventing huge tax hikes. With the amendment gone, property taxes now rise in tandem with home values.

It’s no wonder Polis wants Coloradans to believe this crisis “is directly a function of higher home prices,” as he insisted in the interview.

He advocated scrapping the constitutional protection that would have taken residential rates to around 5 percent today. He then championed legislation that temporarily lowered the rate from 7.15 to 6.765 percent and dubiously told you he lowered your property taxes.

He also signed a bill that effectively prevented a permanent reduction to 6.5 percent.

Based on the information we have now, the governor’s plan will not solve the problem he and other politicians created. At best, it will provide the appearance of temporary relief.

Colorado needs to adopt a statewide limit on the growth in each local district’s property tax revenue. And it needs to do so before this year’s double-digit increases take effect.

Your local government does not need a 40-percent increase in tax revenue from one year to the next simply because your home’s value went up by 40 percent.

Lawmakers should consider capping district revenue growth at inflation plus taxes on new construction. If a district exceeds its allowable revenue, state law should require it to reduce its mills to keep property taxes within the limit.

This would ensure local governments continue to receive the funding they need for essential services, and it would protect all property owners from huge surges in property taxes.

Right now, the only proposal that comes close to hitting the mark is Initiative 21, which may appear on the ballot in 2023.

Ben Murrey serves as director of the Fiscal Policy Center at the Independence Institute in Denver.