Colorado’s Amendment 87: Understanding the Proposed Graduated Income Tax

Colorado voters are set to decide on a significant change to their state’s income tax system. Amendment 87, appearing on the November 3rd ballot, proposes replacing the current flat income tax rate with a graduated system. This new structure would feature six different tax rates, with higher rates applied to higher earners. The goal is to adjust tax burdens, potentially lowering them for most Coloradans while increasing them for the wealthiest individuals and corporations.

Proposed Tax Rate Changes

The core of Amendment 87 is the introduction of a tiered income tax system. Currently, Colorado has a flat tax rate of 4.4%. This proposal would alter that structure starting in the 2027 tax year. The new system would feature six distinct tax brackets, with rates varying based on income levels.

The proposed rates are as follows:

• First $25,000 in taxable income: 3.7%
• $25,001 to $100,000 in taxable income: 4.2%
• $100,001 to $500,000 in taxable income: 4.4%
• $500,001 to $750,000 in taxable income: 7.4%
• $750,001 to $1 million in taxable income: 7.9%
• Above $1 million in taxable income: 8.4%

As seen in the table, the initial tax rates for lower income brackets remain at or below the current 4.4% flat rate. The significant increases in tax rates begin only for individuals and corporations earning over $500,000 annually. The highest rate of 8.4% would apply to those with taxable income exceeding $1 million.

Impact on Taxpayers

Supporters of Amendment 87 argue that the measure would benefit the vast majority of Colorado taxpayers. They estimate that approximately 97% of individuals would see a reduction in their tax bills. For many, this cut could be around $325 per taxpayer, though most reductions are expected to be smaller. This approach aims to shift the tax burden away from middle and lower-income earners.

However, the impact on higher earners is substantial. Estimates suggest that around 46,000 households, representing about 1.36% of Colorado taxpayers, could face increased tax bills. For those earning over $1 million, the increase could be significant. For instance, a small group of filers with an average gross income of $280 million currently pay about $11.9 million in state income tax. Under Amendment 87, their tax bill could increase by approximately $10.8 million. This highlights the concentrated nature of the tax increases on the wealthiest segment of the population.

Revenue Projections and Support

The proponents of Amendment 87, such as the Bell Policy Center and Protect Colorado’s Future, project that the new tax structure could generate substantial additional revenue. Estimates suggest an increase of about $2 billion annually. This revenue is earmarked for important public services, including K-12 education, healthcare, and childcare. Supporters emphasize that these increased taxes would fall only on the top 3% of individuals and the top 5% of corporations earning more than $500,000 per year. They frame the measure as a way for the wealthiest to contribute more to essential state services.

Opposition and Legal Challenges

Opponents of Amendment 87 describe it as a significant tax increase and a fundamental alteration of Colorado’s tax code. Some critics have labeled it a “$2 billion-a-year tax hike on the entire state,” noting that the top tax rate could nearly double. Beyond the policy debate, the measure faces legal hurdles. A lawsuit was filed in Denver District Court seeking to remove Amendment 87 from the ballot. This legal challenge adds another layer of complexity to the upcoming vote.

Furthermore, Amendment 87 is not the only tax-related measure on the ballot. It faces Proposition 136, which proposes to cap the state income tax rate at 4.4%. If both measures pass, the one that receives more votes will determine the state’s tax policy. This creates a potential conflict that voters will need to consider when casting their ballots.

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