TABOR Distorts Tax Burdens, To Wealthy School Districts’ Advantage, Study Finds

Many Coloradans pay more in property taxes than they would if the Taxpayer's Bill of Rights had never been enacted, according to a new study out of Colorado State University. And that's distorting the funding for local school districts.

TABOR imposes complicated limits on residential property taxes, which results in some property-rich school districts having very low tax levies, said Phyllis Resnick, lead economist at Colorado Futures Center at CSU and one of the authors of the study. Meanwhile, "Over the years, as your household became higher income, you were dedicating a smaller and smaller share of your income to paying the local property taxes for schools."

CSU economists ran a complex simulation analyzing conditions if TABOR had never been enacted. It found that taxpayers in 74 of the state’s school districts, representing 81 percent of the population, currently pay more in school property taxes than they would if TABOR had never been enacted.

Prior to TABOR, the property tax burden on households for schools was much more equal, says Charlie Brown, director of the Colorado Futures Center. A provision in the Public School Finance Act of 1988 created that “uniform” mill levy -- a tax of one-thousandth of a dollar for each dollar of the assessed value of property.

"The idea was that no matter where you lived or where your school district was or what its tax wealth was, everybody would levy the same amount of mills to support their local public schools and then, whatever that uniform rate would not generate, the state would backfill with state support,” Brown said. But after TABOR became law, some districts paid virtually nothing and others faced significant burdens.

In essence, Colorado taxpayers are subsidizing extremely low levies in a small sample of districts, many of which are quite wealthy, the study says.

The libertarian Independence Institute meanwhile, argues that TABOR has a stabilizing effect on the economy.

“One of the reasons we have such a strong business climate is people can make predictions about their taxes,” says Mike Krause, the Institute’s vice-president of operations. “TABOR has saved Colorado from becoming California and Illinois where they find themselves chasing constantly having to enact new taxes and fees to get revenue. There’s a point of diminishing returns. You are getting less revenue because people are changing their behavior. People are just packing up and fleeing the state.”

“Just saying there is distributional inequity doesn’t make it bad,” says Institute economist Linda Gorman, who says the study makes a value judgment that equality in taxes should be the highest priority. “It doesn’t necessarily follow that it’s bad to have less dense areas paying more property taxes. “

Krause said the inequity in school finance has to do more with the structure of the school finance system.

“It’s not TABOR’s fault that that the school finance system is set up to backfill districts that don’t raise taxes,” he says.