Colorado’s special session on property taxes brought greater benefits to low-income families

How the money flows

Democrats made three big changes to the tax system for the 2023 tax year:

  • They provided a uniform TABOR refund to all taxpayers next year
  • They expanded the state earned income tax credit
  • They reduced the property tax

First, there’s a change in how the state pays TABOR refunds next year. These refunds are usually paid out in tiers. Coloradans with the highest incomes get significantly higher refunds because they typically pay higher tax bills in the first place.

Hart Van Denburg/CPR News
Republican state Rep. Scott Bottoms, left, talks with fellow GOP lawmakers as he waits to speak Monday, Nov. 20, 2023.

But next year, the state will instead pay out “flat” refunds, splitting TABOR refunds equally among taxpayers.

This is something that was done once before, in 2022.

This time, each refund would be worth about $800 — a net gain of more than $200 for those in the lowest income bracket and a loss of $1,000 for those in the highest bracket. (You can double these amounts for households with two tax filers.)

The second change is the expansion of the state Earned Income Tax Credit, which targets low-income working families. The change will result in $183 million being paid to that group.

Biggest benefits for lower income households

The changes will have the strongest effect on both ends of the income scale.

Looking at changes to TABOR refunds and tax credits, most of the benefits of the special session will go to those households making less than about $51,000. They could gain anywhere from a few hundred to a few thousand dollars, thanks of the larger TABOR refunds and the earned income credit. (Much of the variability comes from the Earned Income Credit; expanding it will cost little to some families, but could pay more than $1,800 more to some of the poorest working families if they have multiple children.)

In total, this lowest-income group, which includes more than 1.3 million taxpayers, would receive a total of about $474 million in new tax relief. About $300 million of that amount will come from their larger TABOR refunds. The rest will come from expanding the Earned Income Credit.

Meanwhile, the TABOR changes will have a negative impact on those earning more than $104,000. They could lose $100 to $2,000 in refunds, depending on their income.

The largest collective costs will fall on the top income bracket, a group of about 280,000 households making more than $309,000. Overall, the TABOR-related changes will cost them nearly $300 million, representing the largest part of the cost impact.

“Takes from the rich and gives to the poor. In the short term, we’re putting a little more money in the pockets of those lower-income people, but we’re not implementing this policy in a vacuum,” said Congressman Gabe Evans, R-Republican. He argued that higher taxes on the rich would drive them out of the country and lead to an economic collapse that would hurt poor people.

Abatement of property taxes

However, this is not the end of mathematics. Some of these wealthier families may still come out neutral or come out ahead, since they will also get a property tax break from the special session.

In the end, the Legislature decided to give each homeowner a $55,000 rebate off the assessed value of their homes. They also lowered the state’s assessment rate — which determines how much of the remaining value will be taxed — from 6.765 percent to 6.7 percent.

These changes apply to the current tax year for which taxes are payable in the following year.

Thanks to lower property tax rates, a homeowner with a half-million dollar home could save several hundred dollars, while a $5 million home would save several thousand dollars. However, these savings will only offset some of the increases in tax bills next year that are due to higher property values.

House Democratic Majority Leader Monica Duran speaks with Republican Minority Leader Mike Lynch on the floor of the House Monday.

Congresswoman Emily Sirota, a Democrat, said the package offers benefits for everyone.

“I think we did something for everybody here and Coloradans can feel good,” Sirota said.

Changes in property tax rates will have an effect on local government and school budgets. The state will give about $145 million to schools, returning them to the revenue they would have received under the old property tax rates. And it would also provide about $54 million in “padding” money to local governments and other local taxing districts.

That should be enough to fully replace property tax dollars for areas whose property tax revenue grew slower than 10 percent in the current reappraisal cycle — mostly rural areas. It would also completely replace affected funding for all ambulance and fire districts, lawmakers said.

Democratic lawmakers on the floor of the House, Monday, Nov. 20, 2023, watch as votes on Senate Bill 1 are counted.

Other, faster growing local authorities will receive either partial infill or no infill. The theory is that big cities like Denver will still come out ahead—even with lower property tax rates, they’ll still see significant revenue gains due to tax base growth.

Republicans said the property cuts were too small; they had proposed a much larger package of cuts that would be paid for by draining some of the state’s fiscal reserves.

“Just as we’ve been doing since the end of the session in 2023, we’re here fighting for the people of Coloradans, fighting to make sure that we save you money and that we don’t burden you with taxes,” said Sen. Barb Kirkmeier, R- .

A final vote on part of the package was briefly delayed after Democratic Rep. Elizabeth Epps of Denver tried to amend a bill to prevent food aid funds from being spent on products from occupied territories in the Middle East, including the West Bank. East Jerusalem and the Gaza Strip.

She then moved to the gallery with a group protesting Israel’s bombing campaign against the Palestinians and tried to prevent Republican Rep. Ron Weinberg from defending Israel from the well of the chamber, shouting that he was “incorrect” because he was not speaking directly. to the contents of the account. The situation was defused and Epps left the room.

Tenant relief and grocery assistance

Democrats also earmarked $30 million for a relief program for tenants who have financial problems. And separately, they included the state in a federal program that could offer $35 million to help lower-income families buy groceries next summer — a change that will cost the state about $7 million to administer.

The tax and TABOR changes are only in effect for one year. The debate over the state’s long-term approach to taxes is already underway.

At the special session, a new panel was formed to prepare next year’s property tax proposals. Meanwhile, several groups are already proposing their own reforms to the property tax system, which could appear on the November 2024 election.

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