" The early 80's were a time of significant taxpayer revolt in Colorado. Taxes on homes had increased significantly and people were dissatisfied. Voters were showing up at town meetings to protest the taxes and to demand that something be done. The Legislature responded by proposing a constitutional amendment that dealt with numerous concerns with the property tax. Tax breaks were given to agricultural and business properties and a provision called the Gallagher Amendment was included to provide protection to homeowners and other residential property owners. Many kinds of property were granted tax breaks or tax exemption; residential was but one of the beneficiaries. The entire property tax amendment to the Colorado Constitution was adopted by the voters of Colorado in 1982.
"The Gallagher Amendment put in place a framework to make sure that residential property would only pay the share of total property taxes that it paid in the early 80"s - residential property paid about 45% of the total tax bill then and would be expected to pay that same share over time. Residential property was given this protection because the roof over our head is a necessity. In much the same way as Colorado doesn't apply its sales tax to food and prescription drugs, the decision was made to provide protection to homeowners and other residential property owners.
"The way the Gallagher Amendment works is that in years of property tax reappraisal - currently every two years - the requirement is that the share of residential property assessed valuation after the reappraisal must be the same as it was prior to the appraisal. So if total residential assessed valuation was 45% prior to the reappraisal it must be 45% after the reappraisal. The mechanism that is used to keep the assessed valuation equal is to change the "residential assessment ratio" - which basically means the portion of residential property that is taxed - so that residential is no more than 45% of the total assessed valuation. "
And why is this necessary? Because over time and for of a variety of reasons, actual residential values have increased much faster than other classes of property. Some of those reasons include the fact that business properties have been given significant tax breaks over time, big business interests are better able to manipulate the system to their benefit and the residential market has been red hot at times particularly in some parts of Colorado. Gallagher is in place to make sure that when there are huge value increases one homes and other residential properties there aren't corresponding huge tax increases for homeowners and renters - who pay these taxes indirectly through their rents.
"Bottom line, Gallagher has worked as it was intended. It has kept residential property taxes at reasonable rates and has avoided massive tax increases that might have led to other efforts to throttle property taxes. In 2019, it saved homeowners and other residential property owners about $2.8 billion dollars and since 1982 the savings have been $35 billion dollars. And the savings will only increase into the future. If history teaches us anything it is that without Gallagher in the Constitution, residential taxes will increase significantly over time."