Colorado Proposition 136: Understanding the Proposed Income Tax Cap

Colorado voters will soon decide on Proposition 136, a ballot measure that could place a legal limit on the state’s income tax rates. This proposal aims to cap both individual and corporate income tax rates at 4.4%, effective January 1, 2027. It’s important to understand that Proposition 136 does not propose to lower the current tax rate. Instead, it seeks to establish the existing rate as the maximum allowed by law.

The measure is backed by Advance Colorado and is set to be voted on November 3, 2026. As of October 2026, it is a pending ballot measure, meaning it is not yet law. This proposition is part of a larger discussion about Colorado’s tax structure, with a competing proposal for a graduated tax system also on the ballot.

What Proposition 136 Would Do

If approved, Proposition 136 would enact a statutory cap on Colorado’s income tax rates. This cap would apply to both individual and corporate income taxes, setting the maximum rate at 4.4%. This rate would be calculated against federal taxable income. The measure requires a simple majority to pass and become state law.

Crucially, this proposition does not change the current tax rate or directly affect state revenue on its own. Its primary function is to create a legal ceiling. A “yes” vote would mean adopting this statutory cap into law. A “no” vote would mean the current income tax rate would remain without this specific statutory limit.

The Potential Conflict with Amendment 87

Colorado voters will also consider Amendment 87, a separate measure that proposes a graduated tax system. This amendment would create six income brackets with varying tax rates, with higher rates applied to incomes above $500,000. The proposed rates under Amendment 87 range from 3.7% for incomes up to $25,000, to 8.4% for incomes over $1 million.

If both Proposition 136 and Amendment 87 receive voter approval, their conflicting rules could create a legal challenge. In such a scenario, the measure that receives more votes would likely prevail. This means voters will need to consider how these two proposals might interact when casting their ballots.

Arguments For and Against the Tax Cap

Supporters of Proposition 136, such as Advance Colorado and the Colorado Chamber of Commerce, argue that the cap would provide predictability and a stable tax environment for businesses and individuals. They believe it prevents potential future tax increases beyond the current rate, offering a competitive tax structure. Kristi Burton Brown of Advance Colorado has stated that the state does not need to raise more taxes.

Critics, however, point out that Colorado already has existing limitations on tax increases through TABOR, the Taxpayer’s Bill of Rights, which was adopted in 1992. TABOR requires voter approval for any tax increases. They argue that Proposition 136 might not add significant new protections beyond what TABOR already provides. The current flat income tax rate was approved by voters in 2022.

Governor Polis’s Stance on Tax Proposals

Colorado’s Governor, Jared Polis, has expressed strong opposition to Amendment 87, the graduated tax proposal. He has described it as “bad policy that would destroy our economy.” While his specific comments on Proposition 136 are not detailed in the provided information, his criticism of Amendment 87 highlights a broader debate about the direction of Colorado’s tax policy. The two measures reflect differing views on whether the state should maintain a flat tax system or move towards a more progressive, graduated tax structure.

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