This story was produced as part of the Colorado Capitol News Alliance. It first appeared at coloradosun.com.
A group of liberal advocacy groups is pursuing a 2026 ballot measure that would change the state constitution to enact a graduated income tax rate in Colorado and raise more than $2 billion each year for services like health care, education and public safety.
The plan would increase income taxes on people earning at least $506,000 in annual taxable income. The proposal would lower the income taxes on people earning less, who represent the vast majority of Colorado taxpayers.
The changes would also apply to business income tax rates, but supporters project most of the increased revenue would come from individuals.
“It’s just clear that we need to be putting big ideas out there and be talking about real, potential solutions,” said Chris deGruy Kennedy, who leads the Bell Policy Center, a liberal fiscal policy nonprofit.
DeGruy Kennedy, a former state representative, was alluding to Colorado’s so-called structural deficit, in which the cost of providing existing government programs and services keeps running into the Taxpayer’s Bill of Rights’ yearly cap on government growth and spending.
The main challenge for supporters of the initiative is getting it on the ballot.
Placing a measure on the ballot that alters the state constitution requires 125,000 voter signatures, including signatures from at least 2% of the voters in each of Colorado’s 35 state Senate districts. That task can cost millions of dollars — which deGruy Kennedy concedes he and his coalition don’t currently have.
“Those conversations are ongoing,” he said. “It’s not a slam dunk. We are certainly talking with folks that have the kinds of resources to fund what we need.”
Should the measure make the ballot, it would require the support of a majority of voters to pass. That’s because it’s stripping language from the state constitution instead of adding new provisions, which require the approval of at least 55% of voters to pass.
The Taxpayer’s Bill of Rights, which is in the state constitution, requires that Colorado’s income tax rate be imposed as a single rate. That’s why it would take a change to Colorado’s constitution to make the state income tax rate graduated.
The pursuit of a graduated income tax rate represents a change for Democrats, who loathe TABOR and have been trying to unwind it for most of the policy’s 30-plus years in existence.
Democrats have realized the futility of trying to rid Colorado of TABOR altogether, mostly because it’s popular among voters. But they see a graduated income tax rate as a happy middle ground that’s much easier to message: People who earn more should pay more in taxes and people who earn less should pay less.
“Frankly, I’ve thought this was the right way to go for the last 10 years,” deGruy Kennedy said. “There are things about TABOR that voters very strongly support, like their ability to vote on their own tax increase. I think voters are really attached to their TABOR refunds, and that’s understandable given that cost-of-living pressures have been one of the prevailing issues.”
The other groups behind the proposal are the Colorado Fiscal Institute, the Colorado Children’s Campaign, Great Education Colorado, the Colorado Statewide Parents Coalition, the Colorado Center on Law and Policy, New Era Colorado, the Colorado Consumer Health Initiative, the Blueprint to End Hunger, Colorado Counties and Commissioners Acting Together, the Colorado Cross-Disability Coalition, and the Colorado Organization for Latina Opportunity and Reproductive Rights.
Colorado is one of just 14 states that have a flat income tax structure, meaning the percentage of someone’s income they pay in taxes does not change depending on how much they earn. Colorado’s income tax rate is 4.4%.
The Tax Foundation, a Washington, D.C., nonprofit that tracks U.S. tax policies on the federal and state levels, says 27 states and the District of Columbia have graduated, or progressive, tax rates, with the highest earners paying more than the lowest earners.
“Currently, six states — Arkansas, Kansas, Massachusetts, Montana, North Dakota, and Ohio — have a two-bracket income tax system,” the foundation wrote in a recent analysis. “At the other end of the spectrum, Hawaii has 12 brackets. Top marginal rates span from 2.5 percent in Arizona and North Dakota to 13.3 percent in California.”
Eight states, including Wyoming, New Hampshire, Texas and Florida, levy no individual income tax at all, according to the foundation. They generate revenue with higher property and sales taxes.
The Colorado ballot measure being pursued by the liberal advocacy groups would drop the income tax rate to 4.2% on taxpayers’ first $100,000 of income. It would remain at 4.4% on income between $100,001 and $500,000.
The income tax rate would increase to 7.5% for income ranging from $500,001 to $750,000, and then to 8.5% for income ranging from $750,001 to $1 million. The rate would be 9.5% on income over $1 million.
The graduated taxation thresholds would be the same for individuals and businesses.
The changes would take effect in 2027. Any new revenue generated by the rate changes would be exempt from the TABOR cap, which is calculated based on the annual increase in inflation and population.
The liberal coalition’s measures will be submitted to the state for review on Wednesday morning.
Separately, conservative activists are pursuing ballot measures that would further cut Colorado’s 4.4% tax rate for everyone. They were successful in persuading voters to slash the rate in 2022 and 2020.
The 2026 ballot won’t be set for another year.
