Amendment B - Modify Property Taxes
This is a referred amendment from the legislature to amend the Colorado Constitution to repeal the Gallagher Amendment.
Major Provisions:
- Repeals the constitutional provision that requires residential property tax assessment rates equal 45% and non-residential property tax rates equal 55% of the total share of state property taxes;
- Repeals the requirement that the non-residential property tax assessment rate be fixed at 29%; and
- Repeals the requirement that the General Assembly adjust the residential assessment rate in order to maintain the 45%-55% ratio of residential to non-residential property taxes.
Background:
In 1982 the voters added the Gallagher Amendment to the state constitution in order to provide ongoing property tax relief to residential property owners. This constitutional provision required that residential property taxes could make up no more than 45% of the state property tax base. Non-residential property owners are responsible for the remaining 55% of state property taxes. The Colorado General Assembly is responsible for adjusting residential assessments so that this 45%-55% ratio is maintained.
When the proposal was adopted in 1982, the residential assessment rate was 21%. Because residential property values have increased faster than business property values, the General Assembly has reduced the residential assessment rate over time in order to maintain the 45-55 split. Today the residential property tax assessment rate has dropped to 7.15% while the non-residential rate is still fixed at the constitutionally required 29%. If the Gallagher Amendment is not repealed, residential property tax assessment rates will again be reduced in 2021.
Property taxes fund local public schools, fire and police departments, hospital districts, city and county governments and other services. Property taxes are paid by homeowners and non-residential property owners like businesses, farmers and oil and gas operators.
Because of the requirement for voters to approve all tax increases, voters are often reluctant to approve increases. Local governments no longer have the means to make up for lost property tax revenue when property tax rates fall.
If voters repeal the Gallagher Amendment in November, a statute would take effect preventing the legislature from changing property assessment rates for four years and freezing residential tax rates at 7.15% and non-residential rates at 29%.
Those in favor say:
1. The Gallagher Amendment is an arbitrary formula governing property tax assessment rates. It uses state-wide averages of real estate values that ignore the difference between urban and rural Colorado. Consequently, rapidly increasing home values concentrated on the Front Range have caused revenue losses for many rural communities that struggle to make up the lost revenue. We need a solution for all of Colorado, not a formula that hurts rural communities and jobs. The Gallagher Amendment is doing more harm than good. This ballot proposal eliminates the Gallagher Amendment so we can maintain the funding we need for critical services such local schools, fire departments, hospitals, emergency and water services.
2. Repealing the Gallagher Amendment is not a tax increase. it freezes residential assessment rates at current levels. Homeowners won’t forego any of the past reductions in assessed valuation that Gallagher has required, but they would give up future reductions. In a period of great division in Colorado, a bipartisan majority in the legislature as well as a broad network of respected business and civic leaders across the state support the effort to repeal the Gallagher Amendment.
Those opposed say:
1. The cost of living for Coloradans continues to increase. On top of income taxes, sales taxes and skyrocketing fees, we do not need to see increases in property taxes in the midst of a recession. We should trust localities to know what’s best for them. If local voters feel the need for increased revenues, they can adjust their local taxes accordingly.
2. Under the Gallagher Amendment, residential property taxes will drop to 5.88% in 2021, but repealing the amendment will result in the tax rate remaining 7.14%, which is a higher rate for homeowners. Repealing Gallagher will also leave the door open for the legislature to increase property rates in the future in order to increase the revenue.
3. Some are rightfully concerned about the impact the Gallagher Amendment has had on businesses in Colorado. The non-residential assessment rate has remained the same through the years while residential assessment rates have been reduced. However, the problem with repealing Gallagher is that it would do nothing to help businesses. The commercial rate would remain the same for now, and it is extremely unlikely that legislators would ever lower it in the future.
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