Tuesday, October 21, 2003
There's no doubt that the restrictions the Gallagher Amendment places upon property tax collections have contributed to the fiscal crises the state of Colorado has faced in the past couple of years. Because of those crises, it is reasonable for lawmakers to call into question the 21-year-old amendment and propose reforms.
That said, Amendment 32 on this year's ballot is not the solution to the state's problems and should be defeated.
The Gallagher Amendment, adopted in 1982, established a strict formula for determining the amount residential homeowners would pay in property taxes. The amendment sets business assessments at 29 percent of valuation for property tax purposes, and requires that commercial properties account for 55 percent of the property tax burden. Residential property is assessed at the percentage necessary to ensure it accounts for 45 percent of the burden.
When Gallagher was approved, residential properties initially were assessed at 21 percent of value. But during the past 20 years, residential growth has outpaced commercial. As a result, the rate at which residential property is assessed has fallen to less than 8 percent of value.
Amendment 32 would freeze the valuation rate for residential property at 8 percent. It also would eliminate the 55-45 ratio between commercial and residential property. Commercial property would continue to be assessed at 29 percent of value.
Proponents argue that the measure would stop Colorado's eroding tax base and provide additional funding for schools and local governments. Presumably, the amendment would lessen the property tax pressure on commercial properties and could help attract new industry and new jobs to the area.
But the risks of Amendment 32 outweigh the benefits.
Foremost, while the ballot language implies Amendment 32 would freeze homeowners' property taxes, it actually is a tax increase on residential homeowners.
Under the current Gallagher restrictions, residential property tax bills have stayed relatively flat because as home values have appreciated, the percentage used for assessment has decreased. Under Amendment 32, each time a home's value goes up, the homeowner pays more in taxes.
Also, when it comes to fixing Colorado's tax issues, the Gallagher Amendment is simply one-third of a three-headed monster. Without also addressing the Taxpayer's Bill of Rights, passed in 1992 to place strict restrictions on tax increases, and Amendment 23, school funding legislation passed in 2000, the state isn't likely to address its funding woes.
In 1982, advocates of the Gallagher Amendment could not have predicted the impact the amendment would have on the state's finances 21 years later. Likewise, it is impossible for proponents of Amendment 32 to say what impact it will have. If residential growth continues, it could produce additional revenues for local government at homeowners' expense. But if the economy stagnates and growth slows, the state will again find itself in a financial pickle.
Amendment 32 is a half-hearted attempt to address the state's budgetary woes. Voters should reject it and demand that the state offer a more meaningful proposal, one that not only addresses Gallagher but also TABOR and Amendment 23.