(The Center Square) – Protect Colorado’s Future coalition recently announced plans to pursue adding a graduated income tax proposal to the 2026 ballot.
The plan would raise taxes on individuals and businesses making more than $500,000 a year. According to the coalition, which is made up of 12 Colorado-based groups, that means taxes would decrease for 98% of Coloradans. Despite that, the coalition expects the change to increase revenue for the state.
“It’s time to put people first and build a fairer tax system that ensures every Coloradan can meet their basic needs like putting food on the table,” said Brace Gibson, policy director at the Colorado Blueprint to End Hunger, a member of the coalition.
The proposal comes as a direct response to the state facing a $1.2 billion shortfall in the wake of cuts in the federal One Big Beautiful Bill Act.
In a special session in late August, Colorado legislators took steps to close the deficit by changing the tax law for Colorado businesses and business owners, which is expected to bring in $150 million for the state.
More steps need to be taken though, argued Chris deGruy Kennedy, president and CEO of the Bell Policy Center, a member of the coalition.
“Colorado is at a turning point. For more than three decades, an upside-down tax code has hurt Colorado’s schools, health care, childcare and the environment,” Kennedy said. “We’ve made the wealthy even wealthier while everyone else struggles to keep up … only the voters of Colorado have the power to make the wealthy pay their fair share and restore funding to critical state priorities.”
If passed, the ballot initiative would end three decades of Colorado using a flat income tax system instead of a graduated income tax system.
In 1987, the state’s citizens voted to switch to the flat income tax system, following 50 years of using the graduated income tax system. That 1987 legislation was sealed with a constitutional amendment that same year.
Some are concerned about the change back to a graduated income tax, arguing on social media it might lead to less revenue by pushing the wealthy and businesses out of the state.
Under the flat income tax system, all Colorado taxpayers currently pay 4%. In the 2024-2025 fiscal year, the state’s general fund brought in $17.18 billion in revenue. With the proposed graduated income tax, the highest earners could begin paying as much as 9.5%.
The coalition argued the new graduated income tax system “recaptures” some of the money the wealthy are saving from federal tax cuts.
“Colorado’s working families shouldn’t have to pick up the tab so the wealthiest get a $71,000-a-year gift from Congress,” said Kathy White, executive director at Colorado Fiscal Institute, a member of the coalition. “A graduated income tax is just common sense.”
To make that change though, a ballot measure is required as the flat tax is a part of Colorado’s constitutional Taxpayer’s Bill of Rights. The measure would also allow excess funds raised above TABOR to be retained by the state and fund various services instead of being refunded to taxpayers.
Under Colorado law, to make it onto the ballot, the initiative will require 125,000 signatures from registered voters. Additionally, that must include signatures from 2% of the voters in each of the 35 state Senate districts.
To pass, the initiative must then receive the approval of a majority of voters to successfully change the state’s constitution and subsequently the tax code.
