How Colorado's Income Tax Measures Could Affect Local Taxpayers
- DENVER — Colorado voters could decide the future of the state's income tax system this November, as two competing ballot initiatives propose different approaches: either replacing Colorado's flat income tax with a graduated system or permanently preserving the current flat tax rate.
The Colorado Secretary of State's Office is reviewing petition signatures for two opposing citizen initiatives. Initiative 195 would replace Colorado's long-standing flat income tax system. Under the proposal, tax rates would decrease for an estimated 97% of earners while increasing for households earning more than $500,000. Initiative 232, backed by the conservative group Advance Colorado, would permanently cap the state's flat income tax rate at 4.4%.
Under the current Taxpayer's Bill of Rights, or TABOR, the state must refund excess tax revenues to residents when collections exceed legal limits. Supporters of Initiative 195, including the Bell Policy Center, argue that the additional revenue is needed to fund public services.
"Reaching this signature milestone means Coloradans are one step closer to a fair tax code and the essential investments our families have gone without for too long," Renee Ferrufino, president of the Women's Foundation of Colorado, said in a statement.
According to a fiscal impact statement prepared by the nonpartisan Colorado Legislative Council Initiative 195 is projected to generate nearly $2 billion in additional state revenue during its first full fiscal year. The measure would create a graduated income tax beginning in tax year 2027 and use the additional revenue to fund K-12 education, health care, early childhood education, and other programs specified in the initiative.
Supporters of Initiative 232 argue that a graduated income tax could discourage investment and encourage high-income residents to leave the state.
"I think Coloradans don't want to pay more in taxes. They don't want to chase revenue out of the state," Michael Fields, president of Advance Colorado, told Colorado Public Radio. Fields argued that a graduated income tax could negatively impact small businesses and reduce overall state revenue if high-earning residents choose to relocate.
According to a Common Sense Institute Colorado analysis of previous statewide tax measures, Denver voters have generally supported tax-related ballot measures at higher rates than El Paso County voters, where TABOR-related measures and flat-tax protections have historically received stronger support.
If both initiatives qualify for the Nov. 3 ballot and are approved by voters, Colorado law provides that the measure receiving the greater number of "yes" votes would take effect.