Colorado homeowners would collectively get about $388 million of property tax relief under the plan proposed by statehouse Democrats as their extraordinary session gaveled in Friday.
What’s known as SB23B-001 would take some of the edge off a leap in tax bills next year. But it would only offset a small portion of the pending tax bill increase, which is being driven by dramatic increases in residential real-estate values.
“I think this bill provides meaningful relief for this moment in time for the average homeowner,” said Democratic Senate President Steve Fenberg, one of the bill’s main sponsors.
He said it’s “not perfect by any means” and that he’s open to more conversations to make changes and try to make it more equitable.
“But I also think we need to be real with ourselves that if we're asking for significant tax cuts, I think we have to really think about the impact to local communities,” he said.
Meanwhile, Republicans in the House and Senate put forward their own plans, both of which were shot down rapidly in committee. Their proposals offered a deeper cut to property tax rates, adding up to about $1.5 billion in savings for homeowners. The House bill would also have reduced income taxes for a year.
“I hope we can all agree that our citizens need relief, and that we can get to meaningful relief,” said Sen. Barbara Kirkmeyer, a Republican who sponsored her chamber’s main GOP tax bill, SB23B-004.
Democrats criticized Republicans’ ideas as fiscally irresponsible. The Republican plan would have required the state government to send about $1.2 billion to schools, local governments and others as “backfill” for reduced property tax revenue. Roughly half that money would come from spending down the state’s fiscal reserves.
Democrats argued that the state needs to keep the rainy day fund fully stocked in case of a recession.
“I don't think it's responsible and it clearly isn't a tool we will have in the future if we spend it all this year, especially knowing that we don't know what the economic headwinds are going to be,” said Fenberg.
The Democratic plan, with its smaller fiscal effects, would pay for its backfill effects from money set aside the general fund but not the state reserves, they said. (Democrats also backed away from the idea of tapping into TABOR refund money for backfill, despite earlier suggestions that they might.)
Kirkmeyer and other Republicans defended the reserve-spending strategy, saying that the state could quickly rebuild those savings with smart budgeting next year. The state’s reserves are at their highest levels in years.
“We are here because we are in an emergency,” said Republican Sen. Jim Smallwood. “(That’s) exactly the kind of thing that reserves are to be used for: to fix a problem when we're in an emergency. Otherwise we would just wait until January, get this stuff fixed.”
How much will homeowners save?
Under the Democratic plan, a home worth around $500,000 and paying a tax rate of 85 mills would save about $226 next year, compared to the status quo.
Under the Republican plan, that homeowner would have saved about $470.
Both plans achieve those savings by reducing the taxable value of a home. Under current law, a home’s taxable value is determined by taking a home’s actual value, subtracting $15,000, and multiplying the remaining value by the statewide “assessment rate” of 6.765 percent.
- The Democratic plan would increase the discount to $50,000 and lower the assessment rate to 6.7 percent.
- The Republican plan would have increased the initial discount to $80,000 and cut the assessment rate to 6.5 percent.
The Republican plan also offered tax breaks to business property owners. The Democratic bill does not.
Any tax relief will be layered on top of earlier rate cuts that were approved in 2022 for the current tax year, which offered discounts for both residential and business owners.
What else is in the mix?
Lawmakers are also advancing a suite of other tax policies, all sponsored by Democrats, including:
- HB23B-1001 to create a program to provide $30 million of rent and utilities help for people with lower incomes through June 2024.
- SB23B-002 to ensure Colordans can get access to a federal program that pays for summertime groceries for kids.
- SB23B-003 to grant equal or “flat” TABOR refunds to all taxpayers next year. All taxpayers would get $847, or twice that for joint filing households. That would be a gain of hundreds of dollars for the lowest-income Coloradans and a loss of nearly $1,000 for the highest paid people.
- HB23B-1003 to convene a task force to draft a long-term plan for property taxes by next October, to include a mix of state lawmakers and other officials and individuals from around the state
- HB23B-1002, an expansion of the state’s Earned Income Tax Credit for the 2023 tax year only. The state would match 75 percent of the federal EITC’s value — tripling what the state currently provides. That could add up to hundreds, or thousands, of dollars for families with lower incomes.
Republicans and Democrats also ran several other measures that were rejected by Democratic-controlled committees. That included a bipartisan proposal to expand the senior homestead property tax break; a Republican bill that would have limited tax value increases to 6 percent for next year; and others.
By and large the proposals bills moving forward are expected to advance along partisan lines with Republicans in opposition.
“Everyone in my caucus is going to have a very hard time getting behind what we believe is a disingenuous effort to bring true property relief to the folks,” said House Minority Leader Mike Lynch.
The special session is expected to wrap up Sunday at the earliest but could go a few days more.
CPR's Bente Birkeland contributed to this reporting
