2023 Leg Session, Ben Murrey, Gold Dome, Proposition HH, TABOR, Taxes, Uncategorized

Murrey: The case against Colorado’s Proposition HH

A July poll of registered voters showed majority support for Proposition HH, the property tax proposal  on the ballot in Colorado this November. The same poll reveals that support disappears when voters learn what the measure actually does.

Proposition HH will not reduce local property taxes. Instead, it will increase state taxes, likely ending taxpayer refunds. But only if voters approve it.

Don’t be fooled

With Senate Bill 23-303, lawmakers referred Proposition HH to voters and dictated the precise wording of the ballot question. The verbiage they chose paints a different picture from what the measure would do.

It begins, “Shall the state reduce property taxes for homes and businesses, including expanding property tax relief for seniors …?”

It’s easy to understand why the Coloradans polled would support the proposal after reading this. The week before Gov. Polis and the Democrat-controlled legislature released their plan, property owners received notices of valuation showing projected property tax increases of 60% or more in some counties. It appears the state is responding by offering to reduce property taxes. Not so.

Proposition HH would not “reduce property taxes,” as the ballot question says.

The measure would reduce the residential assessment rate by 0.065% and exempt $40,000 from a home’s value for tax purposes, but those changes will not reduce property taxes. In fact, regardless of whether the measure passes or fails, property owners will see the largest property tax increase in Colorado history this year.

If HH wins at the ballot, property taxes for a median home will go up about 25%. If it loses, about 32%. In other words, the measure would slightly lower the increase in property taxes. In this sense, one could argue that it provides a modicum of property tax relief, but no amount of mental gymnastics can justify calling it a tax reduction.

But this relief — if you can call it that — will come at the cost of your Taxpayer’s Bill of Rights (TABOR) refund.

The ballot question continues, “Shall the state … backfill counties, water districts, fire districts, ambulance and hospital districts, and other local governments and school districts by using a portion of the state surplus up to the Proposition HH cap as defined in this measure?”

At first blush, that sounds good, or at least benign. If the state has surplus money lying around, why not let them use it to fund fire rescue and schools?

The ballot question, however, does not tell you the “surplus” comes from an overcollection of revenue from Colorado taxpayers. It does not tell you the surplus is the refund you’re entitled to under Colorado law. It does not tell you the state needs your permission to keep that money and spend it elsewhere. And it does not tell you that to vote in favor of Proposition HH is to give that consent.

Some years, Colorado overcollects taxes. When that happens, the constitution requires the state to send the surplus back to taxpayers as a refund. That’s why everyone got a $750 check in the mail last summer — or $1,500 for joint filers. State economists project these refunds will continue for the foreseeable future.

Hidden agenda

The primary purpose of Proposition HH is to allow the state to keep your refund money, effectively increasing your taxes.

The measure is on the ballot for one reason and one reason only. The state needs your approval to keep your money. Nothing else in the measure requires voter approval.

The legislature can provide property tax relief without voter approval. It can send money to schools and fire districts without voter approval. It can fund rental assistance without voter approval.

But the state cannot keep your TABOR refund or raise your taxes without your approval.

The media have called out the Polis administration on the bait and switch in HH. 9News anchor Kyle Clark explained, “The governor proposed reducing property tax increases by using our own TABOR refunds.”

He’s right, but it’s worse than he described.

Over the long term, Polis’ plan will take far more from our TABOR refunds than it saves us in property taxes. It exponentially increases the amount of taxes the state can take and keep each year.

If voters adopt Proposition HH, state taxes will increase by up to $200 billion — give or take — over the next three decades by taking away taxpayer refund dollars.

Proponents of the measure will say it expires after 10 years. But if voters approve HH, they are giving the legislature the authority to extend it indefinitely without additional voter approval after the initial 10-year period.

One thing in the ballot question is true. “A portion of the state surplus” will fund certain local services. But the rest will go into the “Proposition HH General Fund Exempt Account”— essentially a slush fund for all the extra tax money the state will be taking from you.

Local governments lose

The ballot question leads voters to believe counties, water districts, fire districts, ambulance, and hospital districts all benefit from this tax increase. But ask yourself, why have the Colorado State Fire Chiefs not endorsed the measure? Why did over a dozen Colorado counties sue the state, arguing Proposition HH is unconstitutional?

At best, Proposition HH throws your local governments under the bus by taking away some of their anticipated revenue increase while stuffing state coffers with your tax refunds.

In addition to increasing taxes and failing to provide real property tax relief, it transfers more money and power from your local governments to the state.

When voters learn all of this, support for the measure drops from 54% to 43%, according to the recent poll.

Voters like what the legislature tells them Proposition HH does, but they don’t like what it actually does. The poll, conducted by Magellan Strategies, however, stops short of informing respondents of the full impact of HH.

For example, in the section of the poll educating respondents on various effects, the pollster repeats the statement seen in the ballot question that HH expands property tax relief for seniors. Respondents are more likely to support the measure after the pollster explains this.

But this characterization of the policy impact isn’t entirely accurate.

The alleged expansion of the senior homestead exemption is the same $40,000 exemption granted to all homeowners under the measure. And it comes nowhere close to offsetting the tax increase homeowners will experience this year.

The pollsters also told respondents, “If Prop HH is approved, annual property tax payments may still rise, but by smaller amounts and not as quickly.”

This would be new information to someone who only read the ballot question, which indicates HH will reduce property taxes. When the pollster explains that the measure will not reduce property tax payments, support for the measure falls.

But even this understates how unhelpful the measure is to homeowners.

A fake property tax fix

Not only does the measure fail to reduce property taxes — or even keep them stable — but it also does nothing to prevent large property tax increases in the future.

After an initial reduction in the increase in taxes, HH allows property tax bills to grow just as quickly as they would without the measure. Taxes will continue to rise with property values, just as they do now.

To prevent this, the state would need to create a mechanism that pushes property tax rates down as home values rise. Proposition HH guarantees no such protection.

Supporters of the measure might point out that the measure includes a provision to cap property tax revenue increases at the local level. But it also gives each local government the authority to eliminate that cap unilaterally, without additional voter approval.

The state constitution contained a mechanism to keep property taxes in check until voters repealed it in 2020 with Amendment B. As with Proposition HH, the legislature crafted the (extremely misleading) ballot language for Amendment B, which voters then approved.

Repealing that constitutional mechanism led to the current property tax crisis. The same politicians who created that crisis are now using it as a pretext to come after our refunds. Don’t let them get away with it, vote no on Proposition HH.

Ben Murrey is director of the Fiscal Policy Center at the Independence Institute, a free market think tank in Denver.


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