What is the Gallagher Amendment and How Does it Affect Me?
In 1982, voters approved a change to the Colorado Constitution known as the Gallagher Amendment. This law determines how properties are taxed across the state. Under the Gallagher Amendment, property is classified into two broad categories – residential property, and non-residential property.
The residential category includes homes; and the non-residential category includes all other types of property such businesses, farms, oil and gas, commercial, and vacant land.
Gallagher also establishes an assessment rate for each category. The assessment rate is the percentage of a property’s value that is subject to taxation. Taxes are not actually applied to the entire value of a property, rather only a portion of that value. This taxable portion is determined by applying an assessment rate.
The statewide assessment rate for non-residential properties is 29% and the current assessment rate for residential properties is 7.15%. Gallagher further requires that the resulting assessed value of residential properties must be less than the assessed value of non-residential properties. The amendment states residential properties must equal roughly 45% of the statewide assessed value, with the non-residential properties making up the remaining 55%.
The Gallagher Amendment fixes the non-residential assessment rate at 29% and this cannot be adjusted. What this means is that as actual property values across the state grow, the residential assessment rate will fluctuate in order to maintain the 45/55 balance.
The following information is from the State Ballot Information Booklet (or Blue Book), provided by the Legislative Council of the Colorado General Assembly.
Estimate of Fiscal Impact for Amendment B
Local revenue and spending.
For many local governments, including counties, cities, school districts, and special districts, Amendment B will result in increased property tax revenue. The amount of any increase will depend on what the residential assessment rate would have been in the future without the measure, as well as whether voters have already approved local tax increases to counteract future potential decreases in the residential assessment rate.
To the extent that Amendment B increases property tax revenue to school districts, additional funding will be available for the local share of the state’s system of school finance, reducing the amount the state must pay to make up the difference between local revenue and the school district funding amount identified through a formula in state law.
Maintaining the current residential assessment rate results in higher property taxes for many residential property owners compared to what they would owe if residential assessment rates were lowered in the future. The impact on property owners from holding the residential assessment rate constant in the future will vary based on several factors, including what future decreases in the residential assessment rate would have been required without the measure, the actual value of the property, and the tax rates of the local taxing districts. The measure does not impact the assessment rate for most nonresidential taxpayers.
Arguments For Amendment B
- The Gallagher Amendment is outdated and full of unintended consequences. If the Gallagher Amendment is not repealed, owners of high-end homes in Denver’s wealthiest neighborhoods would get a tax cut next year, while small businesses and farmers would pay a larger share of property taxes. The Gallagher Amendment causes small businesses to be taxed at a rate four times higher than residential property owners, and penalizes rural and low-income communities that lack a significant commercial tax base.
- Colorado has some of the lowest residential property taxes in the nation, and Amendment B fixes property tax assessment rates at their current levels. Amendment B is not a tax increase. Under Amendment B, the property tax rates homeowners and businesses pay could only be increased by a vote of the people.
- Amendment B will prevent deep cuts to schools, hospitals, fire protection, and other local services in many areas of the state. Declines in the residential assessment rate caused by the Gallagher Amendment have resulted in significant reductions in vital services provided by local governments, particularly in rural and low-income communities. Amendment B allows local governments to continue providing services that their communities expect.
Arguments Against Amendment B
- Amendment B results in higher property taxes for homeowners by preventing future drops in the residential assessment rate. Increasing home values have already resulted in higher property taxes for many homeowners. Higher taxes mean that homeowners will have less money to spend or save, and landlords may increase rents, at a time when many are already struggling to make ends meet.
- The current property tax system keeps residential property taxes low, and prevents special interests from obtaining tax breaks at the expense of homeowners. Amendment B removes an important protection for homeowners from the constitution. Without these protections, homeowners may end up paying an increasing share of property taxes.
- There are better alternatives to amending the constitution. Local governments can instead ask their voters to raise tax rates or seek other solutions to provide services such as fire protection, schools, and libraries. These alternatives would allow voters in each local jurisdiction to decide for themselves how to best fund services for their community.
Additional Educational Materials
Colorado's Gallagher Amendment Explained - a video by the Colorado Fiscal Institute
This video explains the interaction between two constitutional amendments in Colorado (TABOR and Gallagher). It also explains why home owners will see a property tax break at the same time Colorado’s budget makes cuts.
Understanding Gallagher - a video presentation by Jefferson County
This video is meant to summarize the core concepts of the Gallagher Amendment and how it impacts county budgets.
The information provided within this web page is factual and for educational purposes only. All voters are responsible for independently weighing the pros and cons of any ballot measure and making their own decision how to vote.