New report shows Main Street enterprises having to pay $270 million more next year
DENVER, Oct. 12, 2020—Small businesses and other job creators in Colorado are being threatened with a $250 million to $270 million tax increase next year because of the outdated Gallagher Amendment, according to a new report from a coalition of state business groups: NFIB Colorado, the Boulder Chamber, the Colorado Springs Chamber & EDC and Colorado Concern.
The resetting of the Gallagher formula in 2021 will trigger a series of immediate property tax increases in almost every county in Colorado, the report concludes. Those immediate tax increases are the result of adjustable or automatic mill levies that voters in many communities have already approved to limit the devastating budget cuts to public safety, education and essential services caused by the Gallagher formula, which was put in place almost 40 years ago.
But these impacts and other negative consequences of the Gallagher Amendment are almost completely unknown to the Colorado public, who will be asked to vote on Amendment B, a proposed repeal of the Gallagher Amendment this November. That is conclusion of the report, Iceberg Ahead: The Hidden Tax Increase Below the Surface of the Gallagher Formula.
The report is based on estimates produced for lawmakers by the Department of Local Affairs and a detailed review of historical property tax trends in Colorado. It reveals a series of major impacts that threaten to prolong the COVID-19 recession in Colorado, including:
- An immediate tax hike of $254.1 million to $270.2 million on Colorado small businesses and other job creators due to mill levy increases automatically triggered by the Gallagher Amendment next year.
- A total tax hike of $811.2 million for small businesses and other job creators over 1-3 years due to the combined impact of automatic mill levy increases and stand-alone mill levy increases subsequently approved by voters to maintain funding for essential public services.
- For all property owners, a $975.7 million tax increase over a 1-3 year period, as local communities respond to the Gallagher formula shrinking the size of their property tax bases without their consent and without regard for how local services will be impacted.
- While business owners will be impacted the most by this billion-dollar tax increase, residential homeowners will also be hit with $165.5 million in higher mill levies as well.
- The report also shows that defenders of the Gallagher formula actually touted automatic and floating mill levies as the solution the Gallagher’s impact on funding for essential local services. In 2018, former Senator Dennis Gallagher himself said: “Any problems with Gallagher are really because of the loathsome interaction with TABOR. So with that in mind, I hope you’ll look at the idea of the floating mill levy, which allows any taxing district to raise as much revenue in the year following appraisal as in the previous year.” But today, defenders of the Gallagher formula refuse to acknowledge the impact of their favored solution on the small businesses and other job creators of our state.
“The Gallagher formula is due for a major reset next year, and the real impacts are much different than its supporters would have the public believe,” said Lori Call, Senior Director of Policy Programs with the Boulder Chamber. “Small businesses and other enterprises are facing a huge tax increase at an extremely vulnerable time, when they are struggling to keep their doors open and keep paying their employees due to the COVID-19 recession.”
“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, director of NFIB Colorado. “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.”
“The Gallagher tax increase may be hidden across hundreds of cities, counties, school districts and other local tax authorities, but the impacts are painfully real,” said Rachel Beck, Vice President of Government Affairs for the Colorado Springs Chamber & EDC. “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.”
“To climb out of the worst recession of our lifetimes, Colorado workers need jobs, and we need small businesses to create most of those jobs, as they always have,” said Mike Kopp, President and CEO of Colorado Concern. “At a time when we need business owners to reopen, to invest and to bring people back to work, hitting those same business owners with hundreds of millions of dollars of higher property taxes will hurt everybody. Because of Gallagher, we already have higher effective property tax rates for businesses in Denver than they have in New York City or San Francisco or Seattle, and we can’t afford to give entrepreneurs and job creators another reason to call it quits or leave our state.
Keep up with the latest Colorado small-business news at www.nfib.com/colorado or by following NFIB on Twitter @NFIB_CO or on Facebook @NFIB.CO
For more than 77 years, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is a nonprofit, nonpartisan, and member-driven association. Since its founding in 1943, NFIB has been exclusively dedicated to small and independent businesses and remains so today. For more information, please visit nfib.com.
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