Tax and expenditure limits enacted as part of a 1992 voter initiative have led to inconsistent and unequal property tax burdens in Colorado, with state taxpayers increasingly subsidizing a handful of often-wealthy school districts, according to new research published by the Lincoln Institute of Land Policy. Moreover, more than 80 percent of Coloradans pay more in school property taxes than they would if voters had never enacted the Taxpayer Bill of Rights (TABOR), the state’s signature tax and expenditure limit approved in 1992, according to the research.
“Since the early 1990s, Colorado has enacted layers of reform in pursuit of two conflicting goals – lower property taxes and well-funded public schools,” said Phyllis Resnick, lead economist for the Colorado Futures Center at Colorado State University and lead author of the Lincoln Institute working paper, Measuring the Impact of Tax and Expenditure Limits on Public School Finance in Colorado. “The result is greater inequality and inconsistency, and surprisingly, a greater tax burden for most Coloradans.”
Resnick and co-authors Charles Brown and Deborah Godshall analyzed the impact of reforms intended to reduce property tax burdens and control spending for public education. Using a mathematical simulation, they also modeled what tax burdens would be without two property tax related provisions of the Taxpayer Bill of Rights, a 1992 state constitutional amendment that limited taxes and spending for all units of government and barred tax rate increases without voter approval.
Highlights of the research include:
- Taxpayers in 74 school districts – representing 81% of the state’s population – now pay more in school property taxes than they would if the Taxpayer Bill of Rights were never enacted.
- In most districts where property taxes have decreased, a greater share of school costs are now paid out of the state’s general fund.
- Among the 21 school districts with the lowest school property taxes, residential taxpayers have enjoyed property tax reductions from 59 percent to 97 percent since 1993, and nine of these districts are in the top quartile for household income in the state.
- Disparities in school funding among districts have increased with the more frequent use of override levies, particularly in school districts that have benefited from lower base property taxes subsidized by greater state aid.
“As these results show, Colorado’s experience should serve as a cautionary tale for other states as they consider enacting tax and expenditure limitations,” Resnick said. “In many cases, Colorado’s property tax limits relied on simple formulas that failed to take into account the complex factors affecting school district financing, such as changing local economic conditions and volatile school enrollment. As a result, these limits have served mostly to redistribute – rather than reduce – Coloradans’ tax burden.”
The paper can be downloaded at the Lincoln Institute website, along with a research summary that includes infographics.