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Colorado replaces its flat income tax with a six-bracket system

Colorado replaces its flat income tax with a six-bracket system

Rule Changes

Voters approved Amendment 87, cutting rates for most filers and raising the top rate to 8.4% on income above $1 million

Yesterday: AP calls Amendment 87 for supporters

Overview

Updated 1 hour ago

Since 1986, every Colorado taxpayer has paid the same income tax rate. On Friday, The Associated Press called Amendment 87 as passing with about 51.4% of the vote, replacing that 4.4% flat rate with six brackets that reach 8.4% on income above $1 million.

The money is earmarked: K-12 schools, health care and childcare, roughly $2 billion a year once fully phased in. That covers a projected $1.6 billion deficit in the 2027-28 budget with about $400 million left over. The open question is whether the high earners the tax targets stay to pay it.

Why it matters

Colorado is betting $2 billion a year that it can raise taxes on top earners without losing them.

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Key Indicators

8.4%
Top marginal income tax rate
Applies only to income above $1 million, up from a flat 4.4%.
4.4%
Previous flat rate
The single rate every Colorado filer paid before Amendment 87.
51.4%
Yes vote share
Unofficial tally with 95% of precincts reporting: 1,324,554 yes to 1,253,718 no.
97%
Taxpayers projected to pay less
Based on Colorado Department of Revenue income data cited by supporters.
$500K
Income where rates start rising
Households and businesses below this threshold keep the 4.4% rate or pay less.
$2B
Projected annual revenue
Legislative analysts' estimate for the 2027-28 budget; voters were asked to authorize up to $2.7 billion.
$376K
Added tax for a $10 million filer
Annual increase estimated by The Colorado Sun; a $550,000 household pays about $1,175 more.

Voices

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People Involved

Chris deGruy Kennedy
Chris deGruy Kennedy
President of the Bell Policy Center, a Denver research and policy group
Public supporter of Amendment 87
LF
Loren Furman
President and chief executive of the Colorado Chamber of Commerce
Opposed Amendment 87; said the business lobby is disappointed
EM
Enrico Moretti
Economist at the University of California, Berkeley
Not involved in the Colorado campaign; commented on California tax proposals

Organizations Involved

PC
Protect Colorado's Future Coalition
Ballot campaign coalition
Backed Amendment 87 and claimed victory

The progressive coalition of advocacy groups that wrote and campaigned for the graduated tax.
CC
Colorado Chamber of Commerce
Business advocacy group
Opposed Amendment 87

The state's main business lobby, which argued the tax increase would squeeze employers.
CJ
Colorado Joint Budget Committee
Legislative budget panel
Due to start drafting the 2027-28 spending plan

The bipartisan committee that writes Colorado's annual budget bill.

Timeline

1986 January 2027

7 events Latest: Yesterday
Tap a bar to jump to that date

  1. New brackets apply to tax years starting this date

    Upcoming Policy

    The six rates apply to federal taxable income for years beginning on or after Jan. 1, 2027.

  2. AP calls Amendment 87 for supporters

    Latest Election

    Measure leads 51.4% to 48.6% with 95% of precincts reporting; six new brackets replace the flat rate.

  3. Race too close to call

    Election

    With counting under way, the graduated tax measure is narrowly trailing in early returns.

  4. Coloradans vote on Amendment 87

    Election

    The graduated tax measure and a separate education spending measure, Proposition NN, are on the ballot.

  5. Initiative #193 filed to replace the flat rate

    Campaign

    Proposed measure would swap the uniform rate for a graduated structure and dedicate the revenue.

  6. Referendum C sets the previous mark for new revenue

    Policy

    The last time Colorado approved a comparably large infusion of tax dollars for public services.

  7. Colorado moves to a single income tax rate

    Policy

    A constitutional provision requires every taxpayer to pay the same rate, ending the state's graduated system.

Scenarios

1

Revenue lands near the $2 billion projection

Likely Resolves by End of 2027

Discussed by: Legislative analysts and the Protect Colorado's Future Coalition

High-earning filers stay put, the top bracket delivers, and the 2027-28 budget closes its $1.6 billion gap with roughly $400 million left for schools, Medicaid and childcare. The trigger is a revenue forecast close to the analysts' estimate. The risk is that the estimate rests on behavior that has not been observed yet at these rates.

2

High earners leave and collections fall short

Possible Resolves by Q2 2028

Discussed by: Colorado Chamber of Commerce and economist Enrico Moretti, commenting on California

Affluent households relocate to lower-tax states or restructure income as pass-through profits or capital gains. The top bracket then raises less than projected, and the programs the measure promised get less than advertised. The evidence would appear in state income tax statistics showing fewer filers above $500,000.

3

The money goes to closing deficits, not expanding programs

Likely Resolves by Q2 2027

Discussed by: The Colorado Sun and the governor's budget office

Because Medicaid costs have grown 13.6% a year since 2023, the new revenue is absorbed by the existing shortfall. Schools and childcare see little expansion beyond avoiding cuts. The Long Bill signed in 2027 is the test: it would show the $2 billion covering the projected deficit with no new program spending.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

1986-2026

Colorado's flat tax (1986-2026)

Colorado replaced its graduated income tax with a single rate in the 1980s, and a constitutional provision required every taxpayer to pay the same percentage. The rate sat at 4.4% before Amendment 87.

Then

The flat rate became part of the state's pitch to affluent newcomers and businesses.

Now

It held for four decades, until 51.4% of voters approved six brackets and removed the uniform-rate requirement.

Why this matters now

Amendment 87 is the first structural rewrite of Colorado's income tax since the flat rate took hold.

November 2005

Referendum C (2005)

Colorado voters allowed the state to keep revenue that the Taxpayer's Bill of Rights would otherwise have refunded, easing years of budget cuts.

Then

The state regained room to fund services without a broad tax increase.

Now

It stood as the largest infusion of new tax dollars for public services in Colorado until this election, according to The Colorado Sun.

Why this matters now

It shows how Colorado has previously loosened TABOR's limits when budgets tightened, and how rarely voters agree to do it.

November 2022

Massachusetts millionaire's tax (2022)

Massachusetts voters approved a 4% surtax on income above $1 million, over business opposition and a legal challenge that failed.

Then

The surtax took effect for the 2023 tax year and funded education and transportation.

Now

It collected more than official estimates in its first year, undercutting predictions of an exodus of top earners.

Why this matters now

The closest recent test of Colorado's central bet: that a state can raise taxes on top earners and still collect the money.

Sources

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+4
Investing.com The Colorado Sun Ballotpedia Law360 Tax Authority Reason Steamboat Pilot & Today Complete Colorado Denver Gazette Colorado Secretary of State The Colorado Sun