Polis signs bills limiting property and income taxes

Gov. Jared Polis signs Senate Bill 233 on Tuesday while flanked by supporters of the legislation.

Just eight days after legislators introduced a slowly cooked bill to reduce commercial and residential property tax assessments, Gov. Jared Polis quickly signed the bill into law Tuesday, along with another measure to cut the income tax rate next year.

The signing ceremony — attended by Democrats and Republicans, business and education leaders — struck a very different tone than a similar ceremony at the end of the 2023 session, when Polis inked another measure meant to address rising property-tax bills. Backed only by Democrats, that measure created Proposition HH — a ballot question seeking to trade property-tax breaks for increases in the Taxpayer’s Bill of Rights tax-revenue cap that voters rejected at the November 2023 ballot.

That defeat sent legislators scrambling during a special session late last year to look for alternative tax-cut ideas, including creation of a special commission to suggest ways to achieve long-term property-tax relief. After meeting for five months, the Commission on Property Tax put forward a 10-point plan that got narrowed, reshaped and molded into SB 233 with the help of Democratic and GOP legislative leaders, before passing the House and Senate by a combined vote of 88-10.

“These responsible tax cuts will help turbo-charge Colorado’s economic growth and success,” Polis said in a statement after the signing ceremony.

What the new bills do

SB 233 caps annual property-tax revenue increases at 5.5% for local governments while decoupling assessments for school districts to exempt them from the new cap in addition to an exemption for revenues already allocated to pay off voter-approved bonds. It moves the 27.9% assessment rate on nonresidential properties gradually down to 25% by property tax year 2026 and sets a permanent 6.95% rate on residential properties in 2026 that will be calculated only after homeowners subtract 10% of their home value, up to $70,000.

Colorado state Sen. Barbara Kirkmeyer, R-Brighton, discusses the new property-tax bill in front of supporters at a May 6 news conference.

SB 228, meanwhile, sets a new TABOR refund mechanism that will cut the 4.4% income-tax rate in years when the TABOR cap is exceeded by certain amounts, allowing it to dip as low as 4.25% when that cap is busted by at least $1.5 billion, as it will be during this fiscal year. It also allows for temporary reductions in state sales-tax rates when TABOR overages reach certain levels.

Details of SB 233 emerged as members of the 19-member commission pushed inclusion of a cap to convince both legislative Republicans and voters that the package was significant enough to be a viable alternative to two initiatives proposed for the November ballot.

A continuing debate over proper property-tax breaks

Even as Polis signed the bill Tuesday, though, proponents of the measures signaled they still plan to put their proposals before voters.

Initiative 50, which is approved for the ballot, would cap on statewide property-tax revenue growth annually at 4%. Initiative 108, cleared for signature collection, would cut residential assessment rates to 5.7% and commercial rates to 24% next year and direct legislators to reimburse local governments for lost revenue that could reach some $3 billion, according to estimates.

Polis acknowledged at a news conference introducing the bill last week that business and homeowners still will face an increase in tax bills next year because property values continue to rise — albeit an increase that’s $1.3 billion lower because of SB 233.

Advance Colorado President Michael Fields, who is spearheading the ballot initiatives, said in a press release Tuesday that still-rising bills are a problem to him. He also has criticized carveouts in the bill such as its protections for school districts via the decoupling.

Criticism and praise of amount of property-tax cuts

“The bottom line is that taxpayers will pay more — not less — under the plan,” Fields said. “And its taxpayer protections are far too weak.”

Colorado state Sens. Chris Hansen and Barbara Kirkmeyer discuss Senate Bill 233 in the Senate.

Backers of SB 233 — including cosponsoring Sens. Chris Hansen, D-Denver, and Barbara Kirkmeyer, R-Brighton — appeared ready in standing beside Polis Tuesday to spread the message that theirs is a significant and balanced package to a wider audience.

Hansen said in a news release that SB 233 will reduce tax rates “responsibly” by cutting property-tax bills without gutting school funding.

An effort to reduce income tax too

The Colorado Association of Realtors lauded the tax help offered by the new law as being “especially meaningful relief on commercial properties.” Loren Furman, president/CEO of the Colorado Chamber of Commerce, said she viewed her role on the property-tax commission as being to ensure that both residential and nonresidential property tax rates were reduced.

“Businesses and individuals across Colorado have faced historic rate increases that threaten our economic growth on a broad scale, from driving up the cost of doing business to exacerbating the housing affordability crisis,” Furman said. “This solution is a balanced approach for critical property tax relief while protecting voter-approved bonds for housing and infrastructure needs across the state.”

Almost lost in the final-week push to pass SB 233 was the similarly quick introduction and approval of SB 228, which impacts the amount of take-home pay that workers can make by reducing the income-tax rate, at least for one year. While there are many triggers to determine when income-tax rates will fall in future years, a key accomplishment of the bill is to restore income-tax cuts as a TABOR refund method, said Senate Minority Leader Paul Lundeen, the Monument Republican who was one of its cosponsors.