Equal tax refunds and expanded tax credits for lower-income households were among the top Democratic priorities emerging Wednesday ahead of a special session that will convene Friday to provide property tax relief.
But legislative leaders were still sorting out details for their approach to what’s expected to be the legislative centerpiece — how to directly head off historic increases that will hit property tax bills across the state early next year, with median value increases running at about 40%. It was also not yet clear how much those increases might be scaled back.
Lawmakers will gather under the Gold Dome for a minimum of three days, working through the weekend to forge a post-Proposition HH path forward. Gov. Jared Polis called the special session in the aftermath of voters’ resounding no vote in the Nov. 7 election — by nearly 19 percentage points — on a ballot measure that he and other Democrats in the Capitol had championed.
Democrats have a supermajority in the state House of Representatives and a near supermajority in the Senate, putting them in the driver’s seat for this weekend’s session.
“The focus is really going to be: How can we max out the amount of property tax relief we can offer, given the amount of resources we have,” state Sen. Chris Hansen, a Denver Democrat and an architect of past property tax relief bills, said in an interview Wednesday night.
Expanded tax credits for low-income Coloradans and equalized refunds due during income tax-filing season under the Taxpayer’s Bill of Rights, or TABOR, are also high priorities for the majority party, he added. The state sent flat refunds in the last year, but in Colorado they usually are distributed in differing amounts based on income.
Democrats also have introduced a proposed bill to put $30 million toward emergency rental assistance, to help people who don’t own their homes. Another is a bipartisan effort to increase the homestead exemption offered to property taxpayers for the 2023 tax year, which will show up on bills in early 2024.
The details of the measures are subject to negotiation as Democrats wrangle with how much to tap into the state’s reserves or the $3 billion-plus TABOR surplus, which otherwise has to be refunded to taxpayers. They also have $200 million in the general fund, specifically earmarked for property tax relief, that they can draw from.
The likely emphasis for property tax relief, Hansen said, will on property value deductions — which adjust the amount of money a home has deemed to be worth for tax purposes.
Progressives argue that’s a better way to direct help toward lower-income households than another major option, a flat reduction in the percentage of a home’s value that’s taxable. The latter option would reduce tax bills by a larger dollar amount for higher-valued homes.
Democrats are discussing boosting the value deduction, now set at $15,000, up to somewhere between $50,000 and $70,000. That would mean that a home valued at $500,000 would only be taxed on $450,000 or $430,000 of its value.
“The value deductions create a bigger help for homes that are under $500,000, for example, than your $2 million or $5 million home where it has a relatively small impact,” Hansen said.
Democrats, as they did in Proposition HH’s provisions, also aim to deal with the other side of the coin.
Property owners’ savings on their taxes would bite into local government budgets that rely on property taxes, with some beneficiaries, including school districts, long shorted on tax revenue. Hansen said Democrats are focused on keeping school and fire districts fully funded, but limited resources mean they’ll have to prioritize how much money the state will give other local governments to meet their budget projections.
While the state can influence the overall formula used for determining property taxes, the amount owed is ultimately determined by local governments’ mill levies, which are the tax rates applied to assessed property values.
The special session also opens up other opportunities, said state Sen. Chris Kolker, a Centennial Democrat.
He plans to introduce a bill to expand the earned income tax credit by increasing the state’s match of the federal program. The federal program gives a scaling tax credit to low-income families, with the most going to lower-income families with three or more children. The basic requirements include working and earning less than $59,187.
Kolker wants to increase the percentage of the credit matched by Colorado to 50% or more, up from 25% now, though where that settles will depend on the larger budget conversation. A 50% match would mean an extra $300 for a low-income family with no dependents, and about $3,700 for a low-income family with three children or dependent relatives.
That idea wasn’t part of the Prop. HH conversation, but it was something Polis explicitly allowed in his order calling a special session.
“The people who earn the earned income tax credit — 100% of them, practically, are renters,” Kolker said. “The silver lining of the special session is that we can address these needs of people at the lower income levels who are struggling to pay rent, trying to figure out what bills to pay.”
The minority Republicans will bring their own priorities to the Capitol this weekend.
The party’s leadership is touting a nearly $1.4 billion plan that would both increase the home value deduction to $80,000 and lower the assessment rate — without touching the TABOR surplus. Instead, they’d turn to the state’s historically filled reserves and ask local government to take a one-year buffer of state money. It’s unlikely to provide as much as they expect to receive under current tax projections.
“(The reserves are) there for a crisis,” said Senate Minority Leader Paul Lundeen, of Monument. “Now is the time because the property tax crisis is a legitimate problem for the people of Colorado.”
Republicans in the past have supported using the state’s TABOR surplus to pay for property tax relief — most recently in 2022 — but they are reading the rejection of Proposition HH as voters’ message that they want refunds left alone. The HH opposition campaign focused heavily on the measure’s proposed increase to the TABOR revenue cap, which limits how much state revenue can grow.
Now it’s a line in the sand for the party heading into the special session.
“If you’re taking money out of one pocket to give to the other, you’re still taking it from the same person,” Assistant Minority Leader Rose Pugliese, a Colorado Springs Republican, said.
Hansen called the Republican proposal worrisome since it would draw on the state reserve funds. He raised the specter of the Great Recession, when the state more than a decade ago was forced to make “draconian” cuts to services because it didn’t have enough reserves to weather it.
“I found the Republican proposal to be very fiscally irresponsible,” Hansen said. “To take a deep chunk out of our reserves would put us at a very high risk as we think about a potential recession around the corner.”
Stay up-to-date with Colorado Politics by signing up for our weekly newsletter, The Spot.
