A Colorado county assessor reassesses all properties in the county every two years as part of a general reassessment cycle. A homeowner receives her new Notice of Valuation and discovers her property's actual value has increased by 20%. She is concerned her property taxes will also increase by 20%. Her broker explains that a 20% increase in actual value does not necessarily mean a 20% increase in property taxes. Which of the following best explains why?

Correct Answer

C) The property tax owed depends on both the assessed value and the mill levy; if the mill levy decreases, the tax increase may be less than the valuation increase

Property tax is the product of assessed value and the mill levy. Even if assessed value increases by 20%, the actual tax change depends on whether the mill levy also changes. Under Colorado's TABOR (Taxpayer's Bill of Rights, Article X, Section 20), local governments often must reduce mill levies (or seek voter approval) when assessed values rise, to avoid collecting more revenue than permitted. Therefore, a 20% increase in actual value does not automatically translate to a 20% increase in property taxes because the mill levy may be adjusted downward.