“97% of Colorado taxpayers get a tax cut.”
That’s the message voters see prominently on Protect Colorado’s Future’s website and other sources supporting Amendment 87, the progressive income tax measure on Colorado’s November ballot.
Supporters claim the measure will reduce taxes for 97% of Coloradans while making households and corporations earning more than $500,000 pay more.
But if voters are expected to trust that number, they should also be given transparent and comparable data that lets them reproduce the claimed ‘97%’ and see what they would owe under the new graduated tax rates. Instead, the public information surrounding Amendment 87 makes it not only difficult, but, in the case of certain materials, gives voters the wrong information.
Limitations Legislative Council’s fiscal summary
The Legislative Council Fiscal Summary does not provide a table showing what percentage of taxpayers receive a tax cut. Instead, it provides the estimated average tax owed for eight income categories. The categories are based on federal adjusted gross income, or AGI. For example, the analysis estimates that taxpayers with AGI between $200,001 and $500,000 would see their average state income tax fall by $325 in the first year. Those earning between $1 million and $2 million would see their average tax increase to $4,764 in the first year.
That educates voters about average tax liability within each income group in the first year. However, it does not, by itself, tell us that 97% of Coloradans will receive a tax cut. It also does not clearly explain that people won’t get the tax cuts they expect over time because of “bracket creep.”
Other misleading sources
Voters are also misled by a fact sheet released by Protect Colorado’s Future in June, which included a separate table titled “Effective Tax Rates Under Initiative #195.”
The columns are labeled “Current Effective Tax Rate,” and “New Effective Tax Rate,” even though Colorado’s current 4.4% flat tax rate and the new 3.70% to 8.16% tax rates under 87 are statutory marginal tax rates, not effective tax rates.
This distinction matters because a marginal rate is the rate applied to the next dollar of taxable income in a bracket, while an effective rate is the percentage of a taxpayer’s income that goes toward state income taxes after credits and deductions.
To illustrate this difference, consider Colorado’s existing statutory income tax rate, currently set at a flat 4.4%. In reality, deductions and credits lower the average effective rate for taxpayers across all income levels. Exhibit 15 from this Department of Revenue Report demonstrates that while the on-paper rate remains 4.4%, taxpayers generally pay less.
Coloradans earning under $15,000, for instance, pay an average effective tax rate of 2.00% rather than the full 4.4%. The same problem appears in Protect Colorado’s Future’s tax-rate calculator. The calculator lets users enter an income amount and see their projected tax rate, but it does not allow users to account for individual deductions or tax credits. As a result, the calculator displays the statutory rate and whether a taxpayer would receive a tax cut in the first year, but does not tell the taxpayer what percentage of their income they would actually pay after accounting for the provisions of the tax code.
These distinctions matter when evaluating Amendment 87. In another similar case, The Colorado Sun created a tax cut calculator that also states, “how your effective income tax rate and bill would change under Amendment 87.” However, they again use the marginal rate, not the effective rate, while again neglecting to mention the bracket creep problem. Taxes are hard to understand, and if the proponents cannot even present the information accurately, then how can voters trust the measure’s supposed benefits?
Parker Palmer is from Boulder, Colorado and recently graduated from the College of Charleston with a double major in Economics and History, and a double minor in International Studies and Data Science. She is planning to attend graduate school this fall to get a PhD in Economics.
