Declaring an end to Colorado’s property tax wars – for now, at least – Gov. Jared Polis on Wednesday signed into law a round of modest tax cuts passed during the August special legislative session to avoid the threat of far deeper cuts on the November ballot.
In exchange, political groups Advance Colorado and Colorado Concern rescinded two ballot measures, Initiatives 108 and 50, which would have cut taxes by $2.4 billion, put strict limits on their growth and jeopardized the state’s ability to fund K-12 schools and other public services for years to come.
“This really is an example of bringing folks together who may not see eye to eye on every issue,” Polis said in his office at the state Capitol.
Legislative Democrats and local government officials across the state hoped that the special session deal would bring an end to the yearslong political tug-of-war over property taxes. Since voters repealed the tax-limiting Gallagher Amendment in 2020, taxes have climbed at historic rates because of rising home values. Those increases helped the state fully fund K-12 schools for the first time since the Great Recession, but squeezed household budgets while the state’s cost of living has risen rapidly.
The Legislature passed a number of temporary tax cuts to mitigate their rise in recent years, but it wasn’t enough to satisfy conservative groups outside the Capitol. Conservative political nonprofit Advance Colorado and Colorado Concern, a coalition of business executives, used the threat of the ballot measures to force lawmakers back to the negotiating table to pass additional tax cuts in the special session.
“Today, Colorado taxpayers are the winners,” Michael Fields, the president of Advance Colorado, said in a statement. “Our goal over the past two years has been to solve the state’s property tax crisis through a significant and permanent property tax cut and an enforceable cap to prevent future tax spikes. Coloradans across the political spectrum have made it clear that they need substantial and meaningful property tax relief.”
In a deal negotiated with a small group of legislators before Polis called the special session, lawmakers agreed to pass additional tax cuts in exchange for Fields removing the measures from the ballot. He did so around 10 a.m., a few hours before Polis signed the bill into law.
The bipartisan measure, House Bill 1001, cuts property taxes for residents and some businesses by about $255 million statewide starting in the 2025 tax year. It also puts limits on how fast property taxes can grow, in a bid to prevent large spikes like the one Coloradans experienced in the 2023 tax year for taxes paid this year.
Statewide property tax revenue jumped around 20% after home prices jumped in the wake of the pandemic, state data shows. In the future, school district property tax growth would be limited to 12% statewide over every two-year assessment cycle, or 6% annually, while local governments would be limited to 10.5% every two years. Local voters, however, can override the limits in their own cities or special districts.
Tax bills vary greatly by where someone lives and what their house is worth, but for the typical Denver homeowner with a house worth $700,000, House Bill 1001 will amount to about $70 in annual savings.
“Since 2020 and the repeal of the Gallagher Amendment, unpredictability has burdened our state’s property tax system,” state Sen. Barbara Kirkmeyer, a Brighton Republican, said at the bill signing ceremony. “The people of Colorado deserve certainty.”
Added to the $1 billion tax cut the Legislature already approved in May, the cuts are still a far cry from what the ballot measures proposed.
Initiative 108 would have cut local and school property taxes by $2.4 billion, with an unclear directive that the state replace much of the lost revenue. While the state is constitutionally required to fund schools, the reimbursements for local governments may not have been enforceable. That section of the law was scheduled to be repealed before the ballot measure requirements would have even taken effect, according to legislative analysts.
Over the long term, Initiative 50, a constitutional amendment limiting statewide tax growth to 4% annually, may have had an even larger impact, threatening local governments’ abilities to issue debt for new development.
Local government officials have generally opposed statewide property tax cuts, saying those decisions should be made at the local level. But many local officials said they were willing to live with the cuts in House Bill 1001, in order to avoid the risk of deeper cuts in November.
While the measure passed with wide bipartisan support, not everyone was on board with the deal. Progressives criticized the tax cuts as a boon to wealthier homeowners, while some conservatives argued they didn’t go far enough. Even some supporters of the deal balked at the process, complaining that wealthy political groups shouldn’t be able to bully lawmakers into passing tax cuts using ballot initiatives as leverage.
“It is unfortunate that we had to play defense – that we had to come forward and provide yet additional relief because wealth interests in this state continue to bring forward ballot measures that would ultimately undermine the stability of our communities,” House Speaker Julie McCluskie, D-Dillon, said at the bill signing ceremony.
But McCluskie said she hopes the compromise will end the property tax conversations for at least the next six years. Fields said Advance Colorado and Colorado Concern wouldn’t bring similar measures forward in that period, so long as future lawmakers don’t go back on the deal.
