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Carl’s Conservative Corner

Property Tax Reform?

by | Nov 16, 2023 | Carl's Conservative Corner

As the Colorado Legislature meets in special session to address “property tax reform” let’s take a couple minutes to understand just how we arrived at this point.

From Wikipedia:

The Gallagher Amendment made many significant changes to property taxes in Colorado:when it was passed by the Colorado Legislature in 1984.

  1. It simplified the assessor’s methodology for determining the actual value of property. Prior to this amendment, the assessor would consider some seven factors. The Gallagher Amendment established just three: cost, market, and income.
  2. It established that the actual value of residential real property would be determined by the cost and market approaches to appraisal only.
  3. It established that the actual value of agricultural land would be determined by the income approach to appraisal only (this is the earning or productive capacity of the land, capitalized at a rate prescribed by law).
  4. It provided immediate relief to the tax burden on various types of property by reducing the assessments rates for 1983 and 1984.
  5. It required the General Assembly to determine the percentage of the aggregate statewide valuation for assessment of various classes of property commencing January 1, 1985. Specifically, the General Assembly would be required to adjust the assessment percentage for residential property to ensure that the percentage of the aggregate statewide valuation for residential property in relation to other taxable property would remain the same as that in the prior year, except for increased valuation for assessment attributable to new construction and to increased volume of mineral and oil and gas production. This provision would become known as the Gallagher Adjustment.
  6. It exempted certain property from taxation. These exemptions included: household furnishings and personal effects not used for the production of income; inventories of merchandise and material and supplies held for business consumption or for sale; livestock; agricultural and livestock products; and agricultural equipment used on a farm or ranch in the production of agricultural products. Many of these classes of property had been considered a nuisance tax based upon the complexity of the valuation (and the time and resources which it required) and the marginal revenue produced by the tax.

 

Sounds pretty good doesn’t it! It was and it worked well for 40 years. Under Gallagher residential assessment rate declined from an initial 29% to 5% of actual residence value.  This accounted for increases in residential growth as well as increase in residence values over time.  Well what happened to Gallagher?–in 2020 the Legislature asked Colorado voters to repeal Gallager—and they convinced a majority of voters to agree with them.  In it’s place voters approved locking the assessment rate at 6.75%.  Why did they have to ask the voters –well it was a tax increase, and it was disguised to fool you and set up a the 2023 plea for Proposition HH.  Had Gallager been in place for this tax year the property assessment rate would have further declined to an estimated 4.25% accounting for the increase in property value.  Hmm…I believe the legislature was very disingenuous!  Thankfully the majority of voters saw through the charade this year and voted down HH.
So now in a legislative special session is looking at fixing the problem they created!  Same wolves guarding the voters hen house it is.  The most proven fix would be to re-institue Gallagher  Simple and Proven!.

 

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