(The Center Square) – Colorado households will lose an estimated average of $1,406 in the coming year from increases in property taxes and its related effects on the state economy, according to a new report by a nonpartisan research organization.
Most homeowners on the front range will pay more than $1,000 in additional property taxes, the Common Sense Institute reported in a paper published on Thursday. Higher property taxes will affect the state’s economy by decreasing the amount of income available for households to spend by approximately $511, an amount based on the overall projected economic impact of the increase.
The organization projected a loss of 17,400 jobs in Colorado and the state’s gross domestic product will be reduced by $942 million.
Proposition HH, a statewide ballot measure proposed by the legislature and voted down at the polls earlier this week, would have offered some relief but also impacted other economic and financial areas. On Thursday, Democratic Gov. Jared Polis called a special session for the General Assembly later this month to address the issue as 60% of voters defeated the initiative.
“In light of the election day results, property taxes will, without a doubt, be one of the biggest issues lawmakers address in the coming months,” Kelly Caufield, executive director of the Common Sense Institute, said in a statement.
The median-priced home in Colorado will see a 36% increase in property taxes this year and Prop. HH would have reduced the increase to 26%, the report stated. While the measure would have provided approximately $9.2 billion in property tax relief, the initiative would have backfilled property tax revenue losses with an estimated $9.9 billion from Taxpayer Bill of Rights refunds during the next decade.
“Under current law, property tax revenue is projected to grow $2.13 billion, or $895 per household, above its historic baseline growth rate,” Steven L. Byers, a senior economist with the Common Sense Institute, wrote in the report. “If total state property tax revenue grew at its long-run annual growth rate of 5.9%, revenue would grow from $12.8 billion last year to $13.5 billion this year, an increase of $700 million. Instead, it is projected to grow to $15.6 billion under current law.”
The state’s property tax challenges are compounded by voters repealing the Gallagher Amendment in 2020. Adopted in 1982, it applied a fixed ratio to revenue collected on residential and non-residential property.
“To maintain the fixed ratio, the share of residential property subject to taxation in Colorado was automatically lowered by the Gallagher formula, from 21% in 1983 to 7.15% in 2020,” a Common Sense Institute report stated in 2020. “However, the Gallagher formula kept the share of non-residential property subject to taxation fixed at 29% over the same timeframe, which produced a number of unintended consequences.”
One of the consequences was a higher property tax burden for non-residential property – some as high as 38% more than residential property taxes – for restaurants, retail stores, office buildings, industrial parks and agricultural land.
