NFIB quantifies hidden taxes within Gallagher

With or without a repeal of the Gallagher Amendment, Amendment B on the statewide ballot this fall, property taxes will increase. Without a repeal, the situation will worsen for Colorado businesses, farms and others who are affected at a greater rate by property-tax increases.

That’s the conclusion of the National Federation of Independent Business, which along with the chambers of commerce in Boulder and Colorado Springs, and Colorado Concern, calculated what taxpayers should expect. The groups compiled their findings in a report titled “Iceberg Ahead: The Hidden Tax Increase Below the Surface of the Gallagher Formula.”

The hidden tax, according to NFIB, are floating mill levies in special districts and school districts across the state, mill-levy overrides and bond-repayment levies — taxes already approved by local voters. The additional taxes kick in to make up for any reductions that Gallagher might impose in areas where property values are not already increasing.

Businesses and farms already pay four times as much as homeowners of those additional taxes and, without passage of the Gallagher repeal, will pay five times more.

Gallagher Amendment does three major things:

  • It requires counties to reassess property every two years.
  • It sets a ratio of 45:55 for residential and commercial property so that homeowners never pay more than 45% of all property taxes collected.
  • It locks the commercial property assessment rate at 29%, meaning that local mill levies are applied to a number equal to 29% of a commercial property’s market value.

The net effect since the amendment’s passage, because of rapidly escalating residential valuations, is that the residential assessment rates have dropped from 21% of market values in 1982 to 7.15% this year in order to maintain the 45:55 ratio. Meanwhile, commercial assessment rates are locked at 29%.

Because the residential assessment rate is set statewide, it reflects the rapid increase in values along the Front Range of the state. Cities and school districts in rural and mountain areas, many without significant commercial investment, see decreases in property taxes, which are often made up by asking voters to approve special mill levies. Almost every county in the state, the NFIB said, has approved special levies for schools, fire districts and other special districts. 

“Every time the statewide Gallagher formula resets, it shrinks the property tax base of thousands of local districts across the state without their consent,” the authors of the report wrote. “Many … choose between crippling budget cuts for essential services or higher mill levies to reverse the damage caused by Gallagher.”

The NFIB said that the Colorado Department of Local Affairs predicted that state residents and businesses will see a $975.7 million increase in property taxes over the next three years because of Gallagher as it stands. Of that, $811.2 million will be borne by businesses, farms and ranches.

Much of those increases will occur automatically because of the hidden tax increases already in place, the report said.

“There are also dozens of proposed floating mill levies on the ballot this November, and if these proposals are approved by local voters, the immediate tax increase in 2021 could climb to $324.9 million, with businesses required to pay $270.2 million of the total,” the report said.

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With or without a repeal of the Gallagher Amendment, Amendment B on the statewide ballot this fall, property taxes will increase. Without a repeal, the situation will worsen for Colorado businesses, farms and others who are affected at a greater rate by property-tax increases.

That’s the conclusion of the National Federation of Independent Business, which along with the chambers of commerce in Boulder and Colorado Springs, and Colorado Concern, calculated what taxpayers should expect. The groups compiled their findings in a report titled “Iceberg Ahead: The Hidden Tax Increase Below the Surface of the Gallagher Formula.”

The hidden tax, according to NFIB, are floating mill levies in special districts and school districts across the state, mill-levy overrides and bond-repayment levies — taxes already approved by local voters. The additional taxes kick in to make up for any reductions that Gallagher might impose in areas where property values are not already increasing.

Businesses and farms already pay four times as much as homeowners of those additional taxes and, without passage of the Gallagher repeal, will pay five times more.

Gallagher Amendment does three major things:

  • It requires counties to reassess property every two years.
  • It sets a ratio of 45:55 for residential and commercial property so that homeowners never pay more than 45% of all property taxes collected.
  • It locks the commercial property assessment rate at 29%, meaning that local mill levies are applied to a number equal to 29%…