Small businesses in Colorado could face higher taxes next year under provisions of a state constitutional amendment, a small business advocacy group warns.
But the so-called Gallagher Amendment, including a provision resetting its formula in 2021, could be repealed under Amendment B, a measure on the November election ballot.
“What has been sold to the public as a tax cut is actually a major tax increase, with small businesses and other employers footing most of the bill,” said Tony Gagliardi, Colorado director of the National Federation of Independent Business. “Gallagher doesn’t really cut taxes anymore. It forces local governments to shift taxes and allows the state to dodge responsibility for all the damage this causes. In the end, local communities and local businesses are left holding the bag.”
Approved in 1982, the Gallagher Amendment sets different assessment rates on residential and non-residential property in Colorado so that residential property owners pay 45 percent of total property taxes statewide, while nonresidential owners pay 55 percent.
The NFIB joined with chambers of commerce in Boulder and Colorado Springs as well as Colorado Concern in issuing a report about the effects of resetting the Gallagher Amendment formula in 2021.
According to the report, the change will result in property tax across Colorado as a result of adjustable or automatic mill levies voters approved to limit budget cuts to education, public safety and other services.
Using estimates from the Colorado Department of Local Affairs and a review of historical property tax trends, the report estimates an immediate property tax increase of $254.1 million to $270.2 million on small businesses due to mill levy increases automatically triggered by the Gallagher Amendment.
For all property owners, property taxes would increase an estimated $975.7 million over a one- to three-year period as local governments respond to shrinking property tax bases, according to the report.
Rachel Beck, vice president of government affairs for the Colorado Springs Chamber and Economic Development Commission, said a tax increase could be hidden across hundreds of taxing authorities across Colorado. “If we do nothing, the Gallagher tax’s punishing impact on job creation and business investment will only prolong Colorado’s recovery from the COVID-19 recession.”