Property tax

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How much more property tax burden can Colorado load on the backs of businesses, especially small businesses, before breaking those backs? We will know next year if Amendment B on the November ballot fails to pass.

The Gallagher Amendment in the state’s constitution needs to be repealed, and Amendment B would do that.

Put in place by voters 38 years ago, the amendment came up with a 45/55 formula saying residential property owners should cumulatively pay no more than 45 percent of the state’s property taxes with commercial property taxes making up the balance of 55 percent.

Right now, commercial property is taxed at 29 percent of its value while the residential assessment rate (RAR), which is periodically adjusted under the Gallagher Amendment, is 7.15 percent. This four-to-one formula will increase next year to five-to-one, when the RAR is lowered to 5.88 percent.

“We estimate the Gallagher formula will trigger $811.2 million in new taxes for Colorado businesses, farms, ranches and other job creators across the state. This increase will hit small businesses and other enterprises at an extremely vulnerable time, as they struggle to keep their doors open and keep paying their employees due to the COVID-19 recession.”

Who is the “we” in the above quote? The “we” includes Colorado Concern, Colorado Springs Chamber & EDC, Boulder Chamber, and my association, NFIB, which have published a joint analysis of property tax revenue trends titled, Iceberg Ahead. The Hidden Tax Increase Below The Surface Of The Gallagher Formula.

The report calls attention to what many people have missed or ignored in the Gallagher formula debate: “… (W)hat makes this shifting [property tax] burden more ominous is a large and growing class of so-called automatic local mill levy increases. Sometimes these come in the form of a floating mill levy, other times they come in the form of a bond repayment levy, and sometimes they take the form of mill levy overrides. Whatever the form, voters have given authority in advance for mill levies to increase administratively instead of putting every future adjustment on the ballot for a standalone vote.”

There are 4,500 local tax authorities in Colorado, it needs to be emphasized. There is such a crazy quilt of taxing entities that a small-business owner such as Gail Lindley, whose Denver Bookbinding Company had been in the same location for 75 years, had to move her enterprise not to another city but to a different area of the city to reduce her property tax burden.

Our joint analysis is not unsympathetic to the plight of local governments: “To be clear: The communities that have approved adjustable mill levies, or are contemplating them, bear no responsibility for this. The Gallagher Amendment, which started out … with the best of intentions, now puts these communities into an impossible situation. Every time the statewide Gallagher formula resets, it shrinks the property tax base of thousands of local districts across the state without their consent. Many of the communities served by those local districts are then forced to choose between crippling budget cuts for essential services using the only tools they have.”

The Iceberg Ahead analysis doesn’t fly alone, building on similar cautionary analysis provided by the state’s own Department of Local Affairs and on research from the Common Sense Institute.

Even The Denver Gazette makes some strong arguments for what Amendment B seeks to redress before eventually editorializing against its passage as an over-correction. But I’ll give the final word to our report:

“The Gallagher tax increases may be hidden across hundreds of cities, counties, school districts and other local tax authorities, but the impacts are painfully real. Left unchecked, the Gallagher tax’s punishing impact on job creation and business investment will only prolong Colorado’s recovery from the COVID-19 recession.”

Tony Gagliardi is Colorado state director for NFIB.

Tony Gagliardi is Colorado state director for NFIB.

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