The failure of Proposition HH on Tuesday has major implications for every Coloradan.
Property taxes due in April will rise an average of 40% statewide without swift legislative or local government intervention. And people making less than $99,000 would get less of a refund next year under the Taxpayer Bill of Rights than they would if Proposition HH were passed.
Here’s a closer look at how the measure’s failure will affect your wallet:
Absent government intervention, your tax bill will increase in 2023, 2024 and 2025.
If the Legislature and local governments don’t act, which seems unlikely, the average 40 percent jump in home values statewide would match an equivalent increase in people’s property tax bills next year.
Absent state intervention, taxes will rise again in the 2024 tax year for taxes due in 2025. That’s because the state’s home assessment rate is expected to rise to 6.976% from 6.765% as a temporary relief law the property tax passed by state lawmakers in 2022 ends.
It may seem like a small change, but it can add hundreds of dollars to someone’s tax bill. Colorado property taxes, which are collected at the local level and fund services such as schools, fire districts and parks, are calculated by multiplying the statewide assessment rate by the value of the property as determined by a county assessor. This number is then multiplied by the local mill tax rate.
Additionally, a provision in the 2022 relief measure that exempts the first $15,000 of taxable value for homes in the 2023 tax year expires in 2024, increasing the tax burden on homeowners and businesses even more. .
The statewide home assessment rate is then assumed to rise again in tax year 2025 and for subsequent tax years to 7.15%. In addition, home values will be reassessed this year, taking into account what is expected to be two more years of home price growth. Colorado’s every-other-year revaluation cycle is what led to this year’s jump in the first place.
Assuming there isn’t a big downturn in the housing market, that means tax bills due in 2026 and 2027 will rise.
How to Calculate Your Property Taxes
A mill is a payment of $1 for every $1,000 of assessed value. So to figure out what your tax bill is, you need to multiply your mill rate by 0.001 and then multiply that number by the product of your property value times the statewide assessment rate. You owe so much.
So someone who owns a home valued at $600,000 and assessed at a 6.765% state residential assessment rate in a place where the mill rate is 75 would owe $3,044.25 in taxes each year. The formula to arrive at this number looks like this: $600,000 x 0.06765 x (75 x 0.001) = $3,044.25.
Time is running out for the Legislature to cut taxes owed in 2024
The Democratic majority in the Legislature has control over the statewide tax rate and tax exemptions, so lawmakers can meet in a special session before the end of the year to change next year’s taxes.
But they will have to do so within a few weeks so local authorities can set their budgets.
Under state law, local governments must set mill levy rates by Dec. 15 in order to receive tax bills in the mail by January.
The Legislature could decide to leave rates alone for taxes owed in 2024 and then consider how rates are expected to rise again for taxes owed in 2025 and beyond when the General Assembly reconvenes in January for the regular its legislative mandate.
For most Coloradans, TABOR refunds will decrease in 2024
TABOR, approved by voters in 1992, limits the annual growth rate of government and spending each year to the increase in inflation and population growth. Any money raised above that limit must be returned to taxpayers.
What is TABOR?
The Taxpayer’s Bill of Rights, or TABOR, is a 1992 constitutional amendment that requires voter approval for all tax increases in Colorado. It also limits government growth and spending by mandating that tax revenue collected above the ceiling be returned to taxpayers. The cap is calculated based on inflation and population levels.
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In the 2022-23 fiscal year, which ended June 30, the state collected more than $3.5 billion over the cap — money that will be refunded next year through checks after people file their tax returns.
Proposition HH would repeal, for the second year in a row, the default reimbursement mechanism in which reimbursements are distributed through checks based on six income levels, with lower earners getting less. If Proposition HH were passed, every Colorado taxpayer would receive checks of $832 a year, regardless of income. (The amount is doubled for joint tax filers.)
Because Proposition HH failed, individuals and families making less than $99,000 — 62 percent of the tax bracket — would receive a smaller TABOR refund check next year than if the ballot measure had passed.
People who make more than $99,000 will get a bigger refund.
The chart below shows how the failure of Proposition HH affects the TABOR recovery due in 2024:
Note that although Proposition HH would have repealed the TABOR default recovery mechanism in 2024, the change would have only lasted one year.
In addition, the initiative would have reduced everyone’s tax refunds starting in 2025 and beyond because it raised the TABOR cap by 1 percentage point each year, reducing the amount of money available for refunds.