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Fiscal Impacts of the Gallagher Amendment

Fiscal Policy & Taxes
State Government

In 1982, voters approved a constitutional measure governing property taxes, including a provision known as the Gallagher Amendment (Gallagher).  Gallagher sought to protect homeowners from rising property taxes by maintaining a relatively constant ratio of residential and nonresidential property values in the statewide tax base.

Mechanically, Gallagher works by establishing target percentages for the portions of the property tax base comprising residential and nonresidential property.  The target percentage is achieved using different statewide assessment rates for different classes of property.  Because the nonresidential assessment rate is fixed constitutionally at 29 percent and the actual value of residential property has increased more quickly than that of nonresidential property, the residential assessment rate (RAR) has declined over time.  This reduction has limited the tax base for local governments, while providing tax relief to homeowners.

The impact of Gallagher has varied across different regions of the state.  In some rural areas where property values have not increased as significantly, Gallagher has resulted in substantial reductions in the tax base.  Under the 1992 Taxpayer’s Bill of Rights (TABOR) Amendment, local governments in these areas must seek voter approval to increase the tax rate if they wish to offset reductions to the tax base and maintain a constant level of service.

This memorandum is divided into four sections.  First, it provides background information on key concepts related to property taxation and Gallagher. Second, it reviews the impacts on residential and nonresidential assessed values, the total tax base, and property taxes since the passage of Gallagher.   Third, the memorandum explores how these impacts vary for different counties in the state, depending on the rate of appreciation in property values.  The memorandum concludes by summarizing the potential effect of Gallagher on the 2021 reassessment cycle, given the current pandemic.

The effective date for bills enacted without a safety clause is August 7, 2024, if the General Assembly adjourns sine die on May 8, 2024, unless otherwise specified. Details