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Voters Will Weigh State Income Tax Initiatives on Nov. 3 Ballot

One initiative would create a graduated state income tax, the other would maintain the state’s current flat income tax.

Cynthia Pasquale,

AARP

Published September 02, 2026

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Voters this November could decide whether Colorado should keep its 4.4 percent flat income tax rate or replace it with a graduated system that would require higher earners to pay more.

Initiative 195 would change the tax rate to 3.71 percent for federal taxable income of $25,000 or less, and progressively increase the rate for higher dollar amount ranges until it reaches 8.41 percent for the portion of income that exceeds $1 million. A competing plan — Initiative 232 — would lock in the current flat rate of 4.4 percent. (As of press time, state officials were reviewing the petition signatures needed for each initiative to be included on the ballot.)

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Protect Colorado’s Future, a coalition of advocacy organizations, is leading the charge for the graduated tax, saying the change would help alleviate the state’s budget challenges. Opponents argue a graduated tax could destabilize the economy by reducing the tax base and causing high-income individuals and businesses to flee to more tax-friendly states.

This year, the state faced a $1.5 billion budget deficit caused in part by federal funding cuts and by revenue limits under the Taxpayer’s Bill of Rights, the 1992 amendment to Colorado’s constitution that caps the amount of money the state can retain and spend. Lawmakers cut Medicaid and other health care programs to balance the budget as required by the state constitution.

Under the proposed graduated income tax, increased revenue generated by the change would specifically fund childcare, K-12 education and health care — including long-term care and other supports for older adults and people with disabilities.

The state’s budget pressures are a challenge because of unique constraints under the Taxpayer’s Bill of Rights, says Chris deGruy Kennedy, co-chair of Protect Colorado’s Future and president of the think tank Bell Policy Center.

“Even when the economy is booming, we’re making budget cuts,” says Kennedy, a former Democratic state representative from Jefferson County.

Opponents of a graduated tax say there are better ways to fix the state’s budget woes, including reducing spending; removing tax deductions and credits for special-interest groups; and loosening regulations to encourage business growth.

The main reason to keep the flat tax is “it’s worked for Colorado and it keeps government in check,” says Kristi Burton Brown, executive vice president of Advance Colorado, a think tank that is pushing to keep the flat rate.

Revenue at issue

In 1987, Colorado became the first state in the nation to move from a graduated income tax system to a flat rate of 5 percent. Until then, the graduated rate ranged from 3 percent for the lowest earners to 8 percent for those with at least $14,100 of federal taxable income.

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Today, Colorado is one of 14 states with a flat income tax rate. In 2022, voters approved a rate decrease from 4.55 percent to its current 4.4 percent.

Under the Taxpayer’s Bill of Rights, all revenue generated by income tax — as well as other taxes and fees — over a certain spending limit must be refunded to taxpayers, unless voters approve an expenditure over that limit.

The proposed graduated rate system would not change that. Revenue raised by the current 4.4 percent income tax rate would still be subject to spending limits and refund requirements. All new revenue from the higher graduated rates that exceeds what would otherwise be collected under the current rate would be transferred into a state fund for health care and education spending.

Protect Colorado’s Future estimates that 97 percent of Colorado taxpayers making less than $500,000 would pay less income tax than they do now. An analysis by the government’s nonpartisan Legislative Council Staff projected that the initiative could raise state revenue by as much as $2.7 billion in fiscal year 2027-2028.

Those who favor maintaining a flat tax contend that any revenue gains would decline over time because high earners would leave the state, shrinking the tax base. State government already relies on only 8.4 percent of Colorado households to generate roughly 48 percent of income tax revenue, says Nash Herman, policy analyst with the think tank Independence Institute.

The institute is against a graduated state income tax but, as of press time, had not taken a position on the flat tax ballot initiative. Herman cites an analysis from the Tax Foundation, a research organization neutral in the debate, that shows a “clear negative relationship” between top marginal income tax rates and people leaving a state. Kennedy with Protect Colorado’s Future disputes that argument, noting a University of Chicago study found that a minimal number of high earners relocate specifically because of taxes.

If voters were to approve both initiatives, the one with the most votes prevails.

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Cynthia Pasquale is a freelance writer and former editor at The Denver Post. She has written for the Bulletin since 2011.

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