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It’s an understatement to say the Gallagher Amendment had unintended consequences
How did Amendment B get on this fall’s ballot?
The 2020 Colorado General Assembly was facing an ambitious agenda when the COVID-19 pandemic forced it to close on March 14, on only the 67th legislative day. Lawmakers tried to reconvene only weeks later, but couldn’t get a quorum to assemble until May 26, when both houses finally opened. By then, everything had changed. The pandemic was in full swing, George Floyd had died the day before, and all the carefully planned legislative agenda was out the window. Economic predictions were dire. The long budget bill was slashed to the bone, with many projects dear to their sponsors reluctantly allowed to die. What is now known as Amendment B was referred to the ballot to ask voters to remove Gallagher’s automatic rate cuts for school districts’ and municipalities’ property tax revenues. It was the Legislature’s best hope for economic stabilization.
What is the Gallagher Amendment?
As this feature’s alter ego, Capitol Letters, explained last June as the Legislature adjourned, the Gallagher Amendment was intended to keep residential property taxes stable.
In the early 1980s, home prices were rising rapidly. The Gallagher Amendment sought to prevent homeowners from becoming burdened by property taxes by maintaining a rough equity between taxes on businesses and taxes on residences. It does this by pegging the assessment rate of commercial property at 29% of market value. Then the assessment rate of residential property automatically increases or decreases by the amount needed to hold the ratio of commercial to residential revenue at 55-to-45%.
Unfortunately, the real value ratio of commercial to residential property did not remain stable, so Gallagher has pushed the residential assessment rate, which was 21% the first year Gallagher was effective, all the way down to 7.15% today. And if nothing is done, it will fall again with the next assessment cycle. Colorado now has the 12th lowest residential property tax rate among all 50 states. Gallagher didn’t stabilize property taxes. It squeezed our schools and cities and burdened the state’s general fund, which was forced to subsidize them to make up for plummeting tax revenues.
If I vote yes will my property taxes go up?
Most taxpayers will not see an increase. Without Gallagher’s ratchet, the residential assessment rate will remain at 7.15%. So your property taxes should stay the same unless your house’s assessed valuation greatly increases. That can happen any time your home’s real value appreciates with respect to the other homes in the area.
What you can expect if Amendment B passes is that you won’t see cutbacks in municipal services. Schools won’t have to cut programs or lay off teachers. The public services with the most direct impact on our lives will be more able to continue to operate smoothly and help residents minimize the hardships we encounter during these unstable times.
Pros and cons
These arguments are extracted from the 2020 State Ballot Information Booklet (Blue Book).
The Gallagher Amendment is outdated and full of unintended consequences. If the Gallagher Amendment is not repealed, owners of high-end homes in Denver’s wealthiest neighborhoods would get a tax cut next year, while small businesses and farmers would pay a larger share of property taxes. The Gallagher Amendment causes small businesses to be taxed at a rate four times higher than residential property owners, and penalizes rural and low-income communities that lack a significant commercial tax base.
Colorado has some of the lowest residential property taxes in the nation, and Amendment B fixes property tax assessment rates at their current levels. Amendment B is not a tax increase. Under Amendment B, the property tax rates homeowners and businesses pay could only be increased by a vote of the people.
Amendment B will prevent deep cuts to schools, hospitals, fire protection, and other local services in many areas of the state. Declines in the residential assessment rate caused by the Gallagher Amendment have resulted in significant reductions in vital services provided by local governments, particularly in rural and low-income communities. Amendment B allows local governments to continue providing services that their communities expect.
Amendment B results in higher property taxes for homeowners by preventing future drops in the residential assessment rate. Increasing home values have already resulted in higher property taxes for many homeowners. Higher taxes mean that homeowners will have less money to spend or save, and landlords may increase rents, at a time when many are already struggling to make ends meet.
The current property tax system keeps residential property taxes low, and prevents special interests from obtaining tax breaks at the expense of homeowners. Amendment B removes an important protection for homeowners from the Constitution. Without these protections, homeowners may end up paying an increasing share of property taxes.
There are better alternatives to amending the Constitution. Local governments can instead ask their voters to raise tax rates or seek other solutions to provide services such as fire protection, schools, and libraries. These alternatives would allow voters in each local jurisdiction to decide for themselves how to best fund services for their community.
The Libertarian anti-tax group Colorado Rising Action, not to be confused with the left-wing environmentalist group Colorado Rising, is conducting a massive and predictable campaign in favor of leaving the Gallagher Amendment in place. In more ordinary times, this might be a defensible ideological position. The cons above represent the Libertarian argument, though Colorado Rising Action would like them to be stronger. But all the alternatives they suggest mean a constant fight against Gallagher’s relentless pillaging of local tax revenues. It’s time to shut that engine down.
Even in ordinary times, I would still be for repeal, because I believe in public education and public service, and that local government is essential in people’s lives. But these are not ordinary times, and we mustn’t let ideological considerations overwhelm the very practical necessity of simply holding society together.
There was a period of time in Colorado’s history when way too many regulations were enshrined in the state Constitution. We need to get over that, because it’s just too hard to make course corrections when conditions change. In the last 30 years Colorado’s institutions have suffered for it. If voters pass Amendment B (repeal Gallagher) and Amendment C (charity bingo and raffles) we will have gone a long way to repair the errors of that era.
The nonpartisan and very thorough Boulder County League of Women Voters endorses the repeal of the Gallagher Amendment. So does the Colorado Municipal League, those thoughtful defenders of the Colorado way of life who devote themselves to making sure that local government is good government.
Please vote yes on Amendment B to repeal Gallagher. Our cities and our schools are scrambling to meet our special needs during this frightful pandemic. Don’t make them do it with less money on top of everything else.
Marcia Martin is a member of the Longmont City Council. The views expressed here are her own and do not necessarily reflect those of the council. The council will be considering a resolution in support of Amendment B.