DENVER–Voters will decide on a measure to cap Colorado’s income tax rate at the current 4.4%, after backers gathered enough valid signatures to qualify for the November statewide ballot.
The measure could also face a direct competitor on the ballot, setting up a showdown on how Colorado’s structure for collecting its income taxes looks moving forward.
Initiative #232, backed by Advance Colorado, a conservative advocacy group, qualified for the ballot last week, the secretary of state’s office announced.
Another measure, this one backed by various left leaning group, has yet to qualify for the ballot, Initiative #195, would put in place a progressive income tax system with six tax brackets ranging from 3.7% for the lowest incomes up to 8.4% for the highest earners.
The measure claims the new system would “increase Colorado’s ability to adequately invest in our public schools, health care, and child care systems and programs to improve the affordability of health care and child care.”
Under Colorado’s Taxpayer’s Bill of Rights (TABOR), the state must maintain a uniform, or flat, tax rate. Initiative #195 would also remove the uniform tax rate requirement to pave the way for the multiple tax brackets. while
The constitutional amendment also requires voter approval for new taxes, as well as limiting a portion of the state budget to a formula of population growth plus inflation.
TABOR would remain unchanged under Initiative #232.
Dueling measures
Nash Herman, a fiscal policy analyst with Independence Institute,* a free market think tank in Denver, told Complete Colorado that taxpayers like the “predictability, transparency, and fairness” of the flat tax rate.
“People want to know that their income taxes won’t arbitrarily increase at the whim of the legislature,” he said. “Therefore, capping income taxes at 4.4% would reaffirm taxpayers’ desire for a fair tax code and improve (or at least maintain) Colorado’s reputation as both business and taxpayer friendly.”
“It is hard to say exactly what would happen if both measures pass,” Herman said, pointing to the state’s Blue Book analysis for Initiative #195.
“Generally, when parts of voter-approved measures conflict, the policy outcome is determined by the measure that received more votes,” the Blue Book says. “However, if both measures are approved by voters, the exact outcome is unclear. The state legislature or a court will need to determine how to resolve any conflicts.”
Colorado voters in recent years have a history of supporting lower income taxes rates and rejecting progressive income tax proposals. Voters in 2022 approved with 65% support lowering the flat tax rate to the current 4.4% for individuals and businesses. In 2018, almost 54% of voters rejected Amendment 73, which would have bracketed income tax rates.
Backers of Initiative #232 submitted over 184,000 signatures to the secretary of state in July. Backers of Initiative #195 say they’ve turned in more than 157,000 signatures earlier this month.
The state requires a minimum of 124,238 valid signatures to qualify for the ballot. The secretary of state’s office has until Wednesday, September 2 to review submitted signatures.
Colorado’s general election is November 3.
*Independence Institute is publisher of Complete Colorado
