Colorado lawmakers looking for places to trim the budget may turn to a program they cut in the last recession, a property-tax break for seniors that costs the state nearly $100 million a year.
The state’s homestead exemption, offered to people 65 and older who have lived in their house for at least 10 years, exempts 50 percent of the first $200,000 of the actual value of eligible homes. While local school districts and other governments aren’t shorted property-tax collections, the state backfills the revenue not paid by seniors who get the break.
Colorado voters enacted the tax break by constitutional amendment in 2000, but it didn’t fully kick in until budget year 2002-03, when about 120,000 seniors took advantage of it. Then, in a move that the amendment allowed for, lawmakers suspended the tax break for three years to deal with a more than $1 billion shortfall.
The break was reinstated in 2006-07, costing the state about $74.2 million that year. Since then, the cost of the tax break has grown to an estimated $86.2 million in the current budget year that ends in June and is projected to be worth $93.4 million in the next year.
There are no exceptions for a recipient’s income or for a home’s value, meaning wealthy seniors with resort-town homes can take advantage of the break too.
“There are people getting the tax break who don’t need it,” said Sen. Moe Keller, D-Wheat Ridge, chairwoman of the legislature’s Joint Budget Committee.
She said people don’t remember that the amendment setting up the tax break allows the legislature to decrease or even completely eliminate the break in a given year.
“They (recipients) consider it an entitlement,” Keller said, adding, “We’re now in a position where we may not be able to support it again.”
Some Republicans aren’t ruling out cutting the tax break, either.
“Right now, everything is out there,” said Rep. Don Marostica, R-Loveland, also a member of the Joint Budget Committee.
Morie Pierce Smile, a spokeswoman for AARP Colorado, which represents thousands of retirees, said her organization expects such a move.
“We are concerned that the homestead exemption act is going to be suspended again,” she said.
But in a deep recession, she said, the organization also is worried about state programs that deliver meals and provide home-based services to the elderly.
“Until TABOR (the Taxpayer’s Bill of Rights, which limits state revenue) reform happens, we are going to see these kinds of cuts coming,” she said.
Tim Hoover: 303-954-1626 or thoover@denverpost.com
