In 1978, Proposition 13 cut California’s property taxes 65 percent. It won 64 percent voter approval.
Colorado politicians feared a tax revolt here. In 1982, State Sen. Dennis Gallagher, D-Denver, persuaded 551,334 Colorado voters to “fix” property taxes. “Gallagher” had zero net tax revenue relief. A demagogic property tax shift, it froze residential property tax at 45 percent of property taxes.
A tiny fraction of voters with nonresidential property — business owners, and those with large acreage — pay 55 percent. Free markets no longer set taxable property values. As values or tax rates rose, nonresidential property owners paid higher taxes; homeowner increases were less.
How could such “soak the rich” price fixing exist? Despite the Constitution’s promise of “equal protection of the law,” tax rates are not equal. Court liberals wrongly say discrimination in tax law is OK with them. If a law said “black people pay double,” most of us would rightly protest. But “business owners pay quintuple” is called progressive public policy.
“Gallagher” intended businesses pay tax on 29 percent of value, homes pay on 21 percent. To keep its arbitrary 45 percent limit, when home prices rise faster than business prices, the 21 percent residential ratio declines. Because the business tax ratio is frozen, business owners pay two tax increases if the mill levy and value both rise.
If 5 percent of voters own something besides a home, that 5 percent pay 55 percent of property taxes — forever. That’s wrong.
Market defiance has consequences. The 21 percent ratio of 1982 has slid to 6.1 percent for 2019. Today’s residential tax ratio is two-sevenths of what it was. Politicians did that and did not end the tax revolt in doing so.
Voters enacted the Taxpayer’s Bill of Rights in 1992 with 812,308 votes. Politicians whine they aren’t getting an extra windfall from $400,000 average Front Range prices. Why should they? Grandma’s property tax bill rises with general inflation, not crazy new house prices soon to flatten out.
When revenues dip, government budgets will face limits. This will trigger new political pleas to raise homeowner taxes. TABOR did not cause this government greed. Politicians did.
Although politicians falsely lament TABOR’s “unintended consequences,” the constitutional amendment simply said a tax assessment “ratio” is also a tax “rate” that cannot rise without voter approval.
In 1982, Gallagher’s “magic ratios” of 21 percent and 29 percent meant residential owners paid $4 in property taxes to every $5.52 paid by mostly conservative owners. After 36 years, that split is $1 to $4.75. The residential tax ratio fell from 21 percent to 6.1 percent, a 71 percent reduction that offsets tripling Front Range home prices. That nearly equals California Proposition 13’s first-year tax relief, spread out over 26 years of TABOR protection.
Property tax revenue still rises by inflation and new construction. But thanks to TABOR, it does not match skyrocketing values in our unhealthy housing bubble.
Legislators feel pressure to “do something about Gallagher.” Their last “taxation solution” backfired, but they never learn. One idea involves applying the state constitution differently in urban and rural areas. That’s just more unlawful discrimination.
The answer is far more simple: Repeal “Gallagher” and freeze the ratios at 5 percent and 25 percent. Give long-suffering businesses relief from their 29 percent taxable value plus mill levy increases from 1982 to 1992 (before TABOR) to subsidize residential tax relief.
Making the residential ratio equal would quintuple homeowner bills, causing a real tax revolt (see Paris).
Politicians screwed up and should accept reality.
TABOR turned political bad faith into property owner help. Its decades of relief will never be undone. Just stop this foolish, un-American game, and atone to political victims with a 13 percent property tax cut, from 29 percent to 25 percent.
Politicians often tell us to “trust representative government; citizen petitions will cause the world to explode.” Gallagher shows us the flip side, on which politicians are dishonest and divisive. Not all are on our side. When they propose something, make them prove how it will work. If they can’t, vote the other way.
Douglas Bruce wrote the Taxpayer’s Bill of Rights (TABOR) Amendment passed in 1992. He lives in Colorado Springs.