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Colorado’s Back-Door Tax Hike

A ballot measure called Proposition HH disguises a revenue grab as a property-tax cut.

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Coloradans enjoy relatively low taxes for a blue state, but their luck may not last. Democrats in Denver are backing a measure that would blow through the state’s spending cap under the guise of a bogus property-tax cut.

The coming tax hazard is known as Proposition HH, a referendum that Coloradans will vote on in November. It proposes two policy changes that work in opposite directions. The first would curb property-tax growth modestly by lowering the assessment rate. That would save about $4,600 for an average homeowner through 2032, according to the Common Sense Institute.

The kicker is the second part. The same ballot measure would raise the amount the state can spend by about 25% a year, depriving taxpayers of refunds to which they’re currently entitled. That change would cost each household about $5,100 over nine years, swallowing the savings from the property-tax cut. The changes could cost taxpayers an estimated net $21 billion through 2040.

That’s a lot to stuff into a single referendum, and the confusion is probably intentional. The proposal is titled the “Property Tax Changes and Revenue Change Measure,” with no indication that taxpayers would pay more overall. The Democratic-controlled Legislature approved the changes quietly and referred them to the ballot on the last day of the legislative session in May.

Colorado Democrats have spent years trying to lift the spending cap, and the property-tax mirage is their latest gambit. Voters placed the limits on tax and spending increases in 1992 when they approved the state’s Taxpayer Bill of Rights, known as Tabor. It has blocked progressive lawmakers from blowing out state budgets as they’ve gained ground in the Legislature since 2005.

Tabor’s gift to taxpayers has increased in recent years as surpluses led to large refunds. Coloradans get money back automatically when state revenues exceed obligations, and single filers last year received record refunds of $750 apiece. The budget department has estimated that refunds will grow again this year to more than $800.

That’s unacceptable for public unions, which want the no-limits spending of other Democratic-controlled states. The unions have supported several previous attempts to circumvent the cap and let school systems keep surplus state funds. Now the National Education Association has donated $100,000 to support the new ballot measure.

Democratic Gov. Jared Polis has framed the referendum as a vital fix for public schools, saying that turning it down would “jeopardize or cut funding.” Never mind that funding per pupil grew 47% from 2007 to 2021. Enrollment declined in Colorado during the pandemic as it did in many states, yet the Legislature has changed the funding formula to preserve a higher baseline each year.

A lawsuit now on appeal could thwart the referendum’s back-door tax hike. Advance Colorado, a taxpayer advocacy group, hopes to disqualify the referendum under a state law that requires ballot measures to address one issue. Barring that, voters in November will have to preserve the budget limits that have helped the state thrive

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