In Tuesday’s election, Colorado voters rejected Proposition 120, a measure originally intended to reduce property taxes for just about everyone. Confusion around the measure — prompted by legislative meddling in the citizen initiative process — may have led to the measure’s demise.
The ballot question for Proposition 120 asked voters if they wanted to lower tax rates for all residential property and nearly all nonresidential. That was no longer true by the time Coloradans got their ballots.
The explanation of what a “yes” vote would do, which voters see directly adjacent to the ballot question, contradicted the question itself.
A note included in the state’s Blue Book attempted to explain the conflict: “A law that changed the effect of the measure was passed by the state legislature after the ballot question was written.”
That means, rather than voting on whether everyone would get a tax cut, the Blue Book told voters they were deciding on whether a small minority of Coloradans would get a tax break — namely, owners of multifamily properties like duplexes and triplexes and owners of lodging properties like hotels, motels, and bed and breakfasts.
The Blue Book failed to mention, however, that the legislation which caused all this confusion — and likely dissuaded voters from approving the tax cut — is arguably unconstitutional and currently being challenged in court. If the plaintiff prevails, then the Blue Book may have entirely misrepresented Proposition 120 to voters, and that could have made all the difference at the ballot box.
The Backstory: Gallagher
The fight over property owners’ pocketbooks goes back to 1982 when voters added the Gallagher Amendment to the state Constitution. The amendment dictated that residential property tax collections must always make up 45 percent of total property tax revenues in the state, leaving nonresidential to cover the other 55 percent.
In the following decades, the increase in residential property values far outpaced the increase on the nonresidential side. This caused residential rates to fall as rates for other properties stayed constant. The disparity became most acute in rural parts of the state where residential property values had not risen as much as in tourist and urban areas.
This set up an interesting and unusual political dynamic.
With so many rural conservatives frustrated with the Gallagher Amendment, progressive Democrats and other proponents of big government saw an opportunity to remove the constitutional restraint on increasing property tax rates. They launched an initiative to repeal Gallagher: Amendment B. But instead of revealing their tax-and-spend agenda, they appealed to these rural voters, arguing disingenuously that the repeal of Gallagher would help rural businesses.
Senator Chris Hansen, a progressive Democrat from Denver, made the case to voters last year that they should support Amendment B to decrease the property tax burden on businesses.
“If we fail to repeal the Gallagher Amendment this November, there are dire consequences for every community,” Hansen urged. “Owners of commercial, industrial, and agricultural property will soon pay a property tax rate five times higher than homeowners pay.”
He argued that the high commercial tax burden — paired with existing struggles inflamed by the state’s response to COVID-19 — could force rural businesses to close their doors. When that happens, Hansen reasoned, “The loss of a property tax base will compound losses to rural hospitals, schools, fire and other special districts.”
In short, proponents of Amendment B argued that repealing Gallagher would bring relief to small businesses, especially those in rural areas, without raising residential rates. In truth, it constituted an effective rate hike on homeowners and has done nothing for rural businesses.
But the argument worked. Republican-leaning counties across the western slope and in other rural parts of the state that supported Trump and voted to decrease the income tax voted with Denver and Boulder to repeal Gallagher.
Then, those who convinced them to support Amendment B turned on them.
After posturing as a protector of rural business owners, Senator Hansen and his friends in the legislature wasted no time in ensuring a citizen initiative to reduce property taxes would not benefit those rural businesses or rural homeowners.
What comes next would not have been possible with Gallagher intact.
Legislative Meddling with Proposition 120
While the ink was still drying on the final, unalterable title language for what was then known as Initiative 27 — later Proposition 120 — Senator Hansen, with three colleagues in the legislature, introduced Senate Bill 21-293 to undermine it.
Signed into law by Government Polis in June, the bill divided the existing two assessment categories cited in the ballot question — residential and nonresidential — into six subcategories.
The bill had one objective: to block the passage – or if it passed, prevent the intended effect – of Proposition 120. Opponents of the ballot measure were so confident it would work that they decided organized opposition would be superfluous.
Senator Hansen boasted, “I think Senate Bill 293 reduced the impact of 120 to the point that opponents did not think a ‘no’ campaign was needed.”
The ballot question said the measure would “reduce the residential property tax assessment rate from 7.15% to 6.5% and the non-residential property tax assessment rate from 29% to 26.4%.”
That sounds like a reduction in everyone’s residential and nonresidential property taxes, but Hansen’s bill changed that.
Instead, because of SB 293, the Blue Book explained that “Proposition 120 lowers property tax assessment rates for multifamily housing and lodging properties [but] does not impact assessment rates for other types of residential and nonresidential property.”
Hansen was right.
When Coloradans went to vote, most of them read that a “yes” on 120 would do nothing for them, thanks to legislative meddling. Rather than simply blunting the effect of the citizen initiative, his bill appears to have prevented its adoption by voters altogether.
Where to from Here?
Senate Bill 293 is currently being challenged in court. While damage has already been done on Proposition 120, that lawsuit is still important.
As former Governor Bill Owens noted, “Should SB 293 be allowed to stand, it would serve as a precedent that anytime the Colorado legislature does not like the potential results of a citizen ballot measure, it could simply pass a law that prevents the people’s vote from being put into effect.”
Regardless of the court’s ruling on SB 293, Proposition 120 would have provided relief for at least some property owners. And the outcome of the lawsuit matters tremendously for the integrity of our citizen initiative process. But ultimately Colorado needs a constitutional safeguard better than Gallagher — one that will protect property owners across the state.
That’s something that could easily win the support of voters.
Ben Murrey is fiscal policy director at the Independence Institute, a free market think tank in Denver.
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