Colorado Property Taxes Are Outrageous! (Outrageously Low)

Property taxes have been a hot topic in Colorado this summer as new valuations came out and they were very high. For example, our house increased in value by 49% since the last valuation two years ago! Like many folks, we appealed, as our house is valued at about 35% higher than we could actually sell it for (more on that in a minute). We “won” our appeal and they lowered it by about 4.5%, meaning it’s “only” about 27% higher than what we could sell it for.

So why did it go up so much? Well, part of it is because the value of homes really has gone up a lot most places in the United States, and especially in Colorado. But why did it go up to 35% (now 27%) higher than what we could probably sell it for? Kind of a “perfect storm” of pandemic shortages and interest rates. The “comp” period for this valuation ended June 30, 2022, which means they were looking at comparable sales during the peak of home prices, due to pandemic-related shortages and very low interest rates. Since then, of course, home prices in our area have declined around 20% as the shortages of the pandemic have waned a bit and interest rates, of course, have increased dramatically. So, while I’m still not “happy” with our valuation, I understand why it’s being calculated that way. In the long run, theoretically, those temporary spikes should wash out, as the every-other-year valuation should trend toward the actual value over time. (After all, since the comp period is trailing by a year, sometimes prices will have increased dramatically since the comp period but our valuation won’t reflect that right away.)

Separate from the valuation issue, however, I wanted to talk about the actual property taxes. As I’ve written about before, Coloradans feel that we face a high cost of living in Colorado. As I indicated in that post, I don’t think that’s very accurate. Similarly, many Coloradans (especially now with these extra-high valuations) feel like they are paying a huge amount in property taxes. While the amount we’re paying is certainly significant for most of us, and certainly the increase due to the new valuation is also going to be significant, are we actually paying a “huge amount?”

No. In fact, Colorado has the third lowest effective property tax rate in the 50 United States plus DC. It’s important to acknowledge that property taxes vary across Colorado, with homeowners in some counties paying more than the 0.55% mean effective rate in Colorado and some paying less. (For example, in Douglas County where I live the effective property tax rate for me is about 0.634%.) If you live where the rates are higher than the average, keep in mind that means that typically more money is going to local schools and to county services (so you are getting more for that higher rate). (While not expressed as effective tax rate, you can view the median property taxes by Colorado county at this link, then search on Colorado.)

Let’s use the mean rate of 0.55% for Colorado and compare it to living elsewhere.

• Well, if we were paying the median rate in the 50 states plus DC, we would be paying 0.91% (Florida), or 65% more than we are now!
• If we were paying at the highest quartile (Rhode Island, 1.4%), we would be paying 155% more (two-and-half times as much)!
• And if we paid the effective tax rate for the highest state (New Jersey, 2.23%), we would be paying 305% more (over four times as much)!

None of this means that the increase in property taxes Coloradan’s are facing is insignificant. It isn’t, and it will impact many folks’ budgets and spending. But not only is it important to realize our cost-of-living is really not all that high, and that our property taxes are really not that high, it’s also important to realize the increase in our property taxes really isn’t an “unexpected expense.” Colorado homeowners should know – and be planning for – their property taxes increasing every two years. While the magnitude of this particular increase is larger than they might have expected (although if they were paying attention everyone was talking about how this was coming), the fact that they would need to pay more was not. And, as shown above, what we are actually paying is very, very low compared to most folks in the United States. One might even say, “outrageously low”.

So what’s the point? Well, first, that it’s important to dive a bit deeper into some of these issues than many people do (including headline writers and politicians). And second, and perhaps most importantly, when Coloradans complain about taxes they really, really, really need to keep things in perspective.