A ballot measure asks Colorado voters to make the biggest change to state income taxes in 40 years by raising taxes on the very richest residents while cutting them for everyone else.
Amendment 87, if adopted by voters in the November election, would institute a graduated income tax in Colorado, in which the state taxes income at a progressively higher rate the more a taxpayer earns. The proposed amendment would tax the very wealthiest Coloradans at a higher rate than the rest of the state — pulling off the paradoxical trick of cutting taxes for more than 95% of people while giving the state budget a $2 billion injection.
Given the scope of the proposal, it promises to be one of the marquee fights at this year’s ballot box.
The measure is championed by the Bell Policy Center, the Colorado Fiscal Institute, Great Education Colorado and other progressive groups. Conservative and business groups, including Americans for Prosperity, the National Federation of Independent Businesses, the Colorado and Denver chambers of commerce, and Advance Colorado, have lined up against the ballot measure.
While the proposal would amend the state constitution, it would only remove text from the document. The rest of the changes would be to state law. That means it needs only a simple majority of voter support to pass.
What would Amendment 87 do if passed?
Currently, all Coloradans pay the same 4.4% income tax rate on every dollar of taxable income they earn. This flat tax, called such because it applies equally to all taxpayers, has been in place since 1987, when it replaced a previous graduated income tax system. The flat tax was added to the state constitution as part of passing the Taxpayer’s Bill of Rights Amendment, or TABOR, in 1992.
If passed this year, Amendment 87 would replace the single income tax rate with six new brackets. Those new rates would apply to each range of taxable income reported by individual or joint filers.
Under the new system, the first $25,000 in taxable income a filer reports would be taxed at 3.7%; income from $25,001 to $100,000 would be taxed at 4.2%; income from $100,001 to $500,000 would be taxed at 4.4%; income from $500,001 to $750,000 would be taxed at 7.4%; income from $750,001 to $1 million would be taxed at 7.9%; and every dollar above $1 million would be taxed at 8.4%.
How the ballot proposal to overhaul Colorado taxes could change your tax bill — and who pays more
For most people, this means their overall tax bill would go down. That includes for some people who have incomes that would be taxed at a higher rate, since much of their income would still be taxed at either the current rate or lower under the marginal-rate system.
Taxpayers reporting between $30,000 and $150,000 in income — about 52% of the state, according to nonpartisan analysts — would see their income tax bills drop by about $109 to $283, with filers at the lower end of the spectrum seeing less savings.
People at the very low end of the income spectrum, with less than $30,000 in taxable income, would see savings of about $39 to $1, since they have very little income to tax and likely qualify for other credits and deductions.
The 16% of tax filers with incomes between $150,000 and $500,000 would see about $325 in savings. Even people with incomes of more than $500,000 and less than $1 million would save an average of $284, according to nonpartisan analysts.
Only taxpayers with annual incomes above $1 million would be likely to see an actual increase in income taxes paid — but those 46,000 households, representing about 1.36% of all Colorado taxpayers, could see their bills rise by $26,000 on average.
How much money would the amendment raise?
Amendment 87 would raise an estimated $2 billion in its first year, and more every year after, according to analysts. That would provide a significant boost for the state, which has a general fund budget of more than $17 billion this year.
The money generated would be earmarked for K-12 and early childhood education and childcare. The legislature would be required to supplement current funding for those programs, not replace it.
What about TABOR?
TABOR limits how much tax money the state can collect and spend. Money collected over its revenue cap, which grows on track with population and inflation, must be returned to taxpayers.
The TABOR cap would remain in place, but the extra taxes collected using the new income tax structure would be exempt from the cap. The cap would be calculated using the existing flat tax structure to set a baseline, and nonexempt money over the cap would still need to be returned to taxpayers.
How does the amendment interact with other ballot measures?
Amendment 87 is one of two major proposed overhauls to Colorado’s tax code this fall as the state grapples with another billion-dollar deficit and struggles to keep education and healthcare funding intact. The other, Proposition NN on the ballot, would raise the TABOR cap that limits how much money the state can spend and earmark those extra collections for education. NN would not specifically raise any tax rates, however, and could coexist with Amendment 87's changes if they both pass.
But Amendment 87 is facing direct opposition through Proposition 136.
Proposition 136, which is being run by Advance Colorado, would cap the state income rate at the current rate of 4.4%. Typically, if two ballot measures conflict and both pass, the one that wins the most votes takes precedence and goes into effect.
How that would play out with these two proposals is not clear, however. Nonpartisan analysts predict the legislature or the courts would need to intervene to determine how and to what extent either measure would go into effect should both pass.
What do supporters say?
Proponents say 97% of taxpayers, including most households and businesses, would pay less in overall taxes under Amendment 87, while it would raise taxes only on households that can best shoulder the additional burden, according to .
They say the extra money collected by the state would go to crucial programs, chiefly schools and healthcare, at a time when Colorado can’t rely on help from Washington, D.C.
And supporters point out that graduated income taxes are a well-established way of funding essential public services, with 27 other states and the federal government using this type of tax policy. It would help blunt wealth inequality, they say, and help more Coloradans get the support they need.
What do opponents say?
Critics of Amendment 87 say it's a multibillion-dollar tax increase that will permanently grow the state government and hinder economic growth, according to . It would replace a fair, predictable tax system with a complicated step system that would chase businesses and high-earning individuals out of the state, they say — threatening jobs and state competitiveness.
Rich people already pay more money toward taxes than lower-income people under the flat tax, they point out, and lower-income people have more tax deductions and credits they qualify for. Opponents point out that Amendment 87's new income brackets would not increase with inflation, meaning more and more taxpayers would eventually fall into the higher tax brackets.
