On its face, it seems like a fairly simple addition to the Colorado Constitution. Amendment 21 takes up only a half page of the Colorado blue book voters' guide, outlining what looks like a fairly straightforward way of reducing tax bills in $25 increments.
But a wide coalition of state and local government officials, along with nearly every major business group, are saying don't let the simple text fool you.
The latest anti-tax crusade by anti-government activist Douglas Bruce, they say, would create a complicated morass of government paperwork and ultimately bankrupt many local fire departments, libraries, schools and even county governments.
"We're very concerned about Amendment 21 from a quality-of-life standpoint," said Jeff Crank, vice president for governmental affairs for the Colorado Springs Chamber of Commerce. "Despite claims by the author of the amendment, services will go away. It's that simple. You can't continue to cut taxes without impacting service.
"You know, we believe in tax cuts," Crank added. "We lobby for lower taxes at the legislature. But this is not a smart way to do this. This is the meat cleaver approach."
Crank's comments echo the chorus of voices, from the Colorado Farm Bureau to the State Fire Chiefs Association, who say TaxCut 2000 will essentially take away citizens' ability to provide basic services from fire and police protection to roads on a local level.
Compared to the Taxpayer Bill of Rights, or TABOR, which has limited government spending since 1992, Amendment 21 is an anti-government Godzilla gobbling up local tax revenue and leaving few if any local services surviving, according to critics.
In that sense, critics say, Amendment 21 is not so much an anti-tax measure, but an anti-government measure, the bureaucratic and legal equivalent of a Molotov cocktail lobbed into the halls of government. One anti-21 handout depicts government as a stack of dynamite with a burning fuse to represent the proposed tax-cut measure.
In short, the amendment would require every taxing authority to offer tax relief in $25 dollar increments each year in perpetuity: $25 in 2001, $50 in 2002, $75 in 2003 and so on until the tax bill disappears. Critics argue that some tax districts, local library and fire districts would soon shut down as the funding supply dwindles.
Bruce argues that even small government will not go away because larger taxpayers, such as businesses with large tax bills, will continue to pay taxes as their property assessments rise, thereby compensating for the tax breaks.
"After a while, since we aren't freezing property tax values, property goes up in value," Bruce told the Indy. "Say the WalMart which was paying $20,000 gets a ten-percent reassessment. Now the bill would be $22,000. Originally, it was $20,000, then $19,975, and then $22,000 and then $21,975."
"Those big ones going up -- commercial, industrial, office, apartment buildings -- cancel out a lot of those little $25 accounts," he said. "It's not like you're dealing with a frozen base and in X number of years, it goes down to zero."
With his usual apparent derision for his critics, Bruce says TaxCut 2000 would only force the state to become one-percent more efficient and that, in any event, the state legislature will bail out local tax districts to provide basic services.
"This is the first time in the history of the state that we've had a chance to vote for a tax cut," he said this week. "The first time in 124 years. And they're saying, 'What a ridiculous idea,' that the citizens should actually want to have some tax relief and get [it] by the government having to be one-percent more efficient."
But even longtime fiscal conservatives in the local republican establishment say TaxCut 2000 goes way too far. "As a Republican, I like tax cuts, but they have to be reasonable and fair," said El Paso County Treasurer Ken Kile.
Government, he said, will have to be a lot more than just one-percent efficient to make up for TaxCut 2000, which he said would essentially gut many local tax districts (local fire departments, soil conservation districts, homeowners associations) of all revenue in only a few years.
That's mainly because the amendment would affect each of the taxing entities listed on the average homeowner's tax bill -- from the Pikes Peak Library District, to the local school district, the local municipality, the county, even local soil, fire or water districts.
Because the bill for each of those entities on the average residential property is usually under $100 annually, it would only take a few years before the entire tax base of those districts essentially disappears.
To further his case, Kile posted his analysis of the amendment's effects on the El Paso County Web site. If the amendment is passed, he concluded, the portion of El Paso County's budget that is derived from property taxes would be cut in half, from $34.5 million today to $16.8 million after six years.
Already, the county is grappling with proposals to cut nonessential services such as its parks department, in order to deal with current funding shortfalls.
In the case of Colorado Springs, property tax revenues for the city would drop from $17.3 million to $8.5 million in six years. Manitou would face a similar decline from $652,000 to $354,000, Kile's study shows.
But the most dramatic effect would not come against big government but against little government -- smaller towns and tax districts that only demand small amounts from taxpayers each year, according to Kile's report.
Property tax revenues for the town of Ramah, for example, would drop from $5,800 annually to roughly $382 after five years. The Cascade Fire District would go from $38,000 to $4,600 over the same time period, according to Kile's figures.
Such estimates are one reason many business owners are deeply concerned about the measure's effect on fire insurance, which is pegged to the quality of local fire fighting service. Many local districts rely on such revenue for equipment maintenance, training and operating costs.
Critics of 21 say there's no guarantee that property assessments will continue to rise. A downturn in government services, negative insurance ratings, deteriorating schools and roads, or even a slowdown in the national economy could lead to stagnant property values, they note.
For his part, Bruce conceded that property values have gone down in the past, but he said it's very unlikely that they would remain down for long enough to completely erode government services.
"Even an $800 school property tax -- in 32 years, you think it's going to be zero?" he asked. "You think property values aren't going to go up for 32 years?"
In any event, he said, the state will bail out local districts that lose their revenue base. Bruce had intended to include language in the amendment that would require such bailouts, but critics challenged the provisions saying it violated the state's two-subject rule, which prohibits amendments from including numerous provisions.
Still, Bruce was adamant that the amendment, as written, would require such reimbursements. "Have you read the proposal?" Bruce asked Indy reporter Bob Campbell in a recent interview. "What does the word 'state replacement of local revenue' mean to you? Does that mean peanut butter and jelly sandwich?"
But, the proposal's critics note, the fact remains that the amendment only refers to state backfilling of funds; it doesn't mandate any such act. Regarding state replacement of funds, the amendment itself says only that "the tax cuts and state replacement of local revenue shall not lower state or local excess revenue."
As for the balancing effect of increased property values, Kile said there's no way to know what will happen to property values over the long term.
"If you can tell me what the tax rate will be [in six years] and what the assessment will be, then I can calculate that," Kile said. "But I don't know what that will be."
To make his point, Kile analyzed a property owned by Doug Bruce showing what would have been the tax effect had TaxCut 2000 been enacted in 1994, before property values began soaring in the Pikes Peak region. Even with escalating values, Bruce's county tax bill would have been more than halved, Kile noted, from $393 in 1994 to $150 in 1999. The market value of the home was $84,154 in 1999, he said, a $24,321 jump over its market value in 1994.
In other words, Kile said, the county tax base will be dramatically affected even if property values continue to rise rapidly.
But to Kile, the fundamental reason why Amendment 21 is flawed is that it's unfair. Kile concedes that any tax system cannot be perfect, but he says this Bruce amendment dramatically exacerbates the inequities in the tax code to an unacceptable level.
For example, under Amendment 21, a substantial number of residential properties in Colorado -- homes valued at, say, $150,000 -- will pay virtually no property taxes after only a few years.
What that means, says Kile, is that people with more expensive homes, as well as commercial property owners, who tend to have higher property tax bills, will foot the state's tax burden while many property owners pay next to nothing.
That's unfair, says Kile, and the disparity will worsen as property assessments rise. "The system needs to provide fairness," he said. "Ask anyone if they'd like to have a tax cut and they'd say 'yes,' but most of us recognize that in a reasonably civilized society there has to be some amount of government to provide for what we cannot provide by ourselves."
Meanwhile, local governments can only increase their tax rates consistent with the provisions of TABOR, which limits revenue growth to population, new construction and the consumer price index.
Under TABOR, local governments can raise the tax rate -- i.e. how much of a mill levy you pay -- with a vote of the people. But if that happens, then business owners or those who live in more expensive properties would once again end up paying far more than residential property owners with small- to average-sized homes, Kile said.
But none of that is stopping Bruce, who touts his latest tax measure as a way to help the working poor. "This is a moment of truth for your readers to decide whether they really care about helping low- and middle-income working families who will save in a few years roughly $500 each year in tax savings."
"So the test is, do they really believe in helping poor people and working families, or is that just a front for their desire for bigger government and more social control and more collectivist intervention in personal affairs?"
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