Colorado voters have started receiving their ballots. One measure – Proposition HH – asks younger Coloradans like me to increase our tax burden in exchange for tax handouts to wealthier property owners.
The proposition would reduce future tax refunds under the Taxpayer’s Bill of Rights (TABOR) in exchange for minimal property tax relief. The benefit to older Coloradans who own homes could be a net positive or negative, depending on their individual circumstances. But for younger, lower-income Coloradans trying to get off the ground in an increasingly expensive state, it’s a clear loser.
If Proposition HH passes, the average household would lose about $5,119 in TABOR refund money over the first 10 years, according to a study by the Common Sense Institute. Meanwhile, a median homeowner’s property tax bill would go up some $706 instead of $936 this year, with similar savings thereafter. These cuts could offset some of the loss in tax refunds for homeowners.
Renters, however, would only get the downside effects of losing TABOR refund money with no direct benefit from property tax changes.
Colorado voters added TABOR to the state constitution in 1992 to limit the growth in state spending to a formula of population growth plus inflation. It requires the state to return surplus collections to taxpayers each year unless voters approve a spending increase. That’s why Prop HH is on the ballot.
The measure would raise the current spending limit by an extra 1%, increasing government spending by about 25% annually. That extra spending would come directly out of TABOR refunds.
The spending increase would get larger every year because of the effect of compounding. The measure would increase taxes by up to $9.9 billion through 2032, according to state economists. Projecting their data forward, the cumulative tax increase could grow to an estimated $65 billion over two decades and $192 billion over thirty years without additional voter approval.
Six decades from now, in my old age, I may look back and know that because of Proposition HH, my generation paid an extra $1.87 trillion—or about twice as much in taxes—to the state of Colorado. That’s the power of Propp HH’s 1% increase compounding over the long-term.
TABOR constrained the growth in taxes for older Coloradans for the last three decades. Proposition HH would allow the state to increase state taxes and spending at an unprecedented rate and eliminate TABOR refunds forever. This would affect all taxpayers, but it would most increase the tax burden for my generation, who will bear the brunt of it over the long term.
So, what exactly do renters and young people get in return?
Very, very little.
When critics pointed out that Prop HH does not help renters, lawmakers passed House Bill 23-1311 as a companion bill to HH.
The add-on stipulates that the state must distribute this years’ TABOR refunds equally regardless of income level—like they were last year—but only if Prop HH passes. Those who make less than $100,000 a year (most renters and young people) would receive a one-time increase in their TABOR refund. Every year thereafter their refunds would decline at increasing rates.
State Rep. Chris deGruy Kennedy, one of the prime sponsors of the bill that referred HH to the ballot, said, “We believe that coupling this refund mechanisms bill with the property tax bill is what guarantees that this will do more for lower income people.”
Mr. Kennedy seems to think if the state gives young Coloradans an additional $37—or $233 on the high end—they will consent to a couple trillion dollars in new state taxes over their lifetimes.
The fact is, if the legislature wanted to help low-income renters, they could have implemented equal refunds again this year without making them dependent on HH. Instead, the same legislators who put HH on the ballot killed an amendment that would have ensured equal refunds again regardless of whether HH passes or fails.
The measure also offers $20 million per year in direct subsidies to renters if HH passes, but that would only benefit between 0.35 and 0.53 percent of renters. Even if it were spread out evenly over Colorado’s 750,000+ renters, it would amount to a whopping $26 per renter per year.
Supporters also argue, “Increased property taxes are passed onto renters directly through rent increases, so preventing steep increases will help renters afford to stay where they live.”
I’m not counting on trickle-down economics to offset the cost of Proposition HH for people like me.
Colorado has the third lowest property taxes in the country. While they are rising historically fast, the solution is not to transfer the burden from wealthier property owners who recently enjoyed large increases in their property values to lower-income renters and young people getting their start.
Prop HH may work out well for some, but it’s a horrible deal for young Coloradans and renters.
Mark Berndt is a Colorado native studying business and economics at NYU Shanghai and a participant in the Future Leaders Program at the Independence Institute, a free market think tank in Denver.
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