Amendment 87 — Romer Institute of Evidence-based Policy

Evidence Analysis of the 2026 Ballot

Amendment 87: Graduated Income Tax

WHAT the Measure Would Do

Starting January 1, 2027, this measure, if approved, would shift Colorado’s state income tax rates from a flat rate of 4.4% to a graduated rate structure ranging from 3.7% to 8.4%, depending on income level. Colorado’s top rate would be 10th highest among states, and the highest in the Rocky Mountain region. As reflected below, rates would fall for filers under $100,000 and remain the same for filers up to $500,000 in taxable income. Section 20, Article X of the Colorado Constitution, also known as the Taxpayer’s Bill of Rights (TABOR), would be amended to remove the restriction on graduated tax rate structures.

  
    Table 1: Income Tax Rates: Current Law and Amendment 87
    
        Taxable Income
        Current Flat Rate
        Proposed Graduated Rate
        Change
      
        $25,000 or less
        4.4%
        3.7%
        -0.7%
      
        $25,001 – $100,000
        4.4%
        4.2%
        -0.2%
      
        $100,001 – $500,000
        4.4%
        4.4%
        No change
      
        $500,001 – $750,000
        4.4%
        7.4%
        +3.0%
      
        $750,001 – $1,000,000
        4.4%
        7.9%
        +3.5%
      
        $1,000,001 or more
        4.4%
        8.4%
        +4.0%
      
        Source: Colorado Secretary of State, Initiative #195 Final Text.

Table 1: Income Tax Rates: Current Law and Amendment 87
Taxable Income	Current Flat Rate	Proposed Graduated Rate	Change
$25,000 or less	4.4%	3.7%	-0.7%
$25,001 – $100,000	4.4%	4.2%	-0.2%
$100,001 – $500,000	4.4%	4.4%	No change
$500,001 – $750,000	4.4%	7.4%	+3.0%
$750,001 – $1,000,000	4.4%	7.9%	+3.5%
$1,000,001 or more	4.4%	8.4%	+4.0%
Source: Colorado Secretary of State, Initiative #195 Final Text.

HOW This Would Impact Taxpayers

The table below shows how taxes owed would change for taxpayers at different income levels if Amendment 87 passes. Taxpayers or households earning under $500,000 annually will pay less in taxes, while those earning more will pay more. Under the measure, the income brackets that determine tax rates are not adjusted for inflation, which is how the federal graduated income tax brackets are adjusted.

  
    Table 2: Colorado Income Taxes Paid under Current Law and Amendment 87
    
        Taxable Income
        Current Taxes Owed
        Taxes Owed under Amendment 87
        $ Change
        Share of Income – Current Law
        Share of Income – Amendment 87
      

    
        $25,000
        $1,100
        $925
        -$175
        4.4%
        3.7%
      

        $50,000
        $2,200
        $1,975
        -$225
        4.4%
        4.0%
      

        $100,000
        $4,400
        $4,075
        -$325
        4.4%
        4.1%
      

        $250,000
        $11,000
        $10,675
        -$325
        4.4%
        4.3%
      

        $500,000
        $22,000
        $21,675
        -$325
        4.4%
        4.3%
      

        $750,000
        $33,000
        $40,175
        $7,175
        4.4%
        5.4%
      

        $1,000,000
        $44,000
        $59,925
        $15,925
        4.4%
        6.0%
      

        $5,000,000
        $220,000
        $395,925
        $175,925
        4.4%
        7.9%
      

    
        Source: Author’s calculations based on current Colorado law and Amendment 87 proposed tax rates.
      

  

Table 2: Colorado Income Taxes Paid under Current Law and Amendment 87
Taxable Income	Current Taxes Owed	Taxes Owed under Amendment 87	$ Change	Share of Income – Current Law	Share of Income – Amendment 87
$25,000	$1,100	$925	-$175	4.4%	3.7%
$50,000	$2,200	$1,975	-$225	4.4%	4.0%
$100,000	$4,400	$4,075	-$325	4.4%	4.1%
$250,000	$11,000	$10,675	-$325	4.4%	4.3%
$500,000	$22,000	$21,675	-$325	4.4%	4.3%
$750,000	$33,000	$40,175	$7,175	4.4%	5.4%
$1,000,000	$44,000	$59,925	$15,925	4.4%	6.0%
$5,000,000	$220,000	$395,925	$175,925	4.4%	7.9%
Source: Author’s calculations based on current Colorado law and Amendment 87 proposed tax rates.

Background

Currently, Colorado imposes an income tax on individual and corporate income. The state has imposed an income tax on individuals’ and corporations’ earnings since 1937, 24 years after the United States began to impose an income tax when the Sixteenth Amendment to the U.S. Constitution was ratified.

While the U.S. has always imposed a graduated rate structure on income taxes, Colorado’s rate structure has varied over time. Between 1937 and 1987, Colorado applied a graduated individual income tax, increasing rates based on income levels. From 1937 to 1959 rates ranged from 1% to 10%. Since then, the following rate changes have occurred:

1960: Rates were narrowed to between 2.5% to 8%
1987: Flat income tax rate of 5% replaced the graduated system
1999: Lowered to 4.75%
2000: Lowered to 4.63%
2020: Lowered to 4.55%
2022: Lowered to 4.4% [1]

Colorado’s corporate income tax rates have changed over time, including a brief period with graduated rates in the 1980s. Since then, the following changes have occurred:

1994: corporate income tax rate set to a flat rate of 5%
1999: lowered to 4.75%
2000: lowered to 4.63%
2020: lowered to 4.55%
2022: lowered to 4.4%

Of the 50 U.S. states and the District of Columbia, 15 have a flat tax rate and 27 impose a graduated rate structure. Nine states do not have a state income tax. Colorado bases its taxable income on federal taxable income, meaning most deductions taken on federal income taxes also apply to Colorado.

While income tax rates are important to understanding a household's or corporation’s taxes paid, there are many tax credits and deductions that Colorado also offers that reduce what is paid to the government. In 2022, the latest year of data, total income tax collections were reduced by $2 billion, or about 15% of total income tax collected that year, due to tax credits, deductions, or exemptions. [2]

WHY This Is on the Ballot?

Under the Taxpayer’s Bill of Rights, any increase in taxes must be approved by voters.
   [3]

  In Colorado, both the Colorado General Assembly (known as a referred measure) and citi-zens of the state (known as an initiated measure) can take action to change Colorado state law or the constitution on the ballot. 

The measure must receive a simple majority vote to pass.  This is because the measure would only repeal language in the state constitution, and such measures are exempt from the 55 percent vote required for other constitutional amendments.

WHO Put It on the Ballot?

Amendment 87 is an initiated measure which makes changes to both state law and the state constitution. This measure is sponsored by Chris deGruy Kennedy and Kiyana Newell through the Bell Policy Center and New Era Colorado Action Fund. [4] The Bell Policy Center is a 501c3 nonprofit research and advocacy organization and New Era Colorado Action Fund is a 501c4 advocacy organization.

EVIDENCE from Research Literature

Peer-reviewed research can help to understand how the changes proposed under this amendment might affect the state’s taxpayers, economy, business climate, and state-spending outcomes. The highest-quality research uses randomized controlled trials, specific to the place, time, and context they measure. The studies below draw on other states and earlier periods, but their findings, whether they suggest large effects or small ones, can provide insights to the potential impact in Colorado.

Of the research surveyed, the largest impact the state can expect if Amendment 87 passes is a reduction in taxable income by high-income earners most impacted by the tax changes. This was evidenced by tax rate increases in California and New Jersey, and it takes the form of income sheltering, compensation restructuring, or relocation to other states. These income reductions would likely result in a lower-than-expected increase in state tax revenue.

For example, California voters enacted Proposition 30 in 2012, which raised the top income tax rates by up to 3 percentage points. A peer-reviewed study found that an estimated 45 percent of the expected new revenue in the first year, and 61 percent in two years, was eroded by behavioral responses [5] The majority of that impact was from higher-income earners who stayed in the state but reported less taxable income. Amendment 87 proposes a larger increase of 4 percentage points at the highest rate. While no precise conclusion can be drawn from one state’s experience, the evidence indicates a substantial reduction in reported revenue is possible. (Evidence Level 4, evidence informed; moderate certainty)

1. Individual Income Impacts

State per capita income may decline slightly if the income tax increases. A 1% in-crease in state income tax was associated with a 0.05% reduction in per capita in-come growth. [6] (Evidence Level 3, theory informed; moderate certainty)
State economic growth, typically measured by state gross domestic product, is not likely to be impacted by changes to income tax rates. [7] (Evidence Level 3–4, theory to evidence informed; moderate certainty)
A small percentage, 1% or less, of high-income earners may relocate out of state due to the increase in income tax rates. [8] (Evidence Level 4, evidence informed; moderate-to-high certainty)
High-income earners will likely reduce their taxable income through income shel-tering, compensation restructuring, or relocation, as mentioned above, in at least the first couple years of higher income tax rates in the state. [9] (Evidence Level 4, ev-idence informed; moderate certainty)

2. Corporate Income Impacts

No direct link has been cited by a 50-year analysis of the 48 contiguous states be-tween economic growth and corporate taxes. [10] (Evidence Level 3, theory informed; low-to-moderate certainty)
One study found a small positive relationship between corporate tax revenue and personal income growth. [11] (Evidence Level 3, theory informed; low certainty)
One study found a negative relationship between increases in corporate tax rates and employment: a 1 percentage point increase in the tax rate reduced employ-ment and the number of business establishments by 0.4% each. [12] (Evidence Level 4, evidence informed; moderate certainty)
A comprehensive review of over 75 studies prior to 1997 found that a 1% increase in business tax revenue was associated with a 0.11% decrease in total employ-ment growth, a 0.20% decrease in manufacturing investment, and a 0.20% de-crease in manufacturing firm formation. [13] (Evidence Level 3, theory informed; low-to-moderate certainty)
A study analyzing foreign investment decisions found that a 1% increase in the corporate tax rate was associated with a 1% decrease in a state's share of foreign investment in property, plant, and equipment. [14] (Evidence Level 3, theory informed; moderate certainty)
A study found that corporate tax cuts raise investment and output, but the effects are modest: a 1% decline in Colorado's corporate tax rate would increase long-term output by approximately 0.57% and shift investment toward equipment and infrastructure away from research and development. [15] (Evidence Level 2–3, theory informed; low-to-moderate certainty)

3. Government Spending Impacts

A meta-analysis of approximately 30 quasi-experimental studies of U.S. school spending found that sustained increases in K–12 spending improve student achievement, educational attainment, and adult earnings, with the largest effects for students from low-income families. These effects depend on how the revenue is spent. [16] (Evidence Level 5, proven; high certainty)

OTHER Factors to Consider

There are impacts to Colorado’s economy that may not have been measured or are difficult to measure. These include:
Changes to TABOR to allow a graduated rate structure that make it easier to change other tax rates to a graduated structure in the future;
The perception by the business community that increasing income taxes is not business friendly; or
The timing of business decisions to expand.


The research literature measures what happened to GDP, employment, and firm counts after tax changes took effect. It does not measure how a proposed change in tax structure, as distinct from tax level, affects business location decisions, site selection frameworks, and investor perception before and during implementation. These effects operate through different mechanisms than the ones the literature captures, and they matter independently of whether the direct economic effects are large or small.

Colorado's reputation as a relatively low-tax, business-competitive state compared to California has been a documented economic development asset.
 [17]  
  A graduated income tax structure with top rates between 7.4% and 8.4%, up from the current rate of 4.4%, changes that positioning significantly. A change of this magnitude requires an understanding of what the structure signals to businesses and investors making forward-looking decisions about where to locate, hire, and invest.

These changes to the tax structure may not be considered on their own but as a larger shift away from business-friendly policies when combined with other changes in the state.

Conversely, more workers could be attracted to the state as a result of cuts to income taxes paid by low- to upper middle-income Coloradans. This policy change could also be considered in conjunction with other worker-friendly policies enacted in recent years.

FISCAL and Budget Impact

Legislative Council Staff estimates that this measure would generate over $950 million in state fiscal year 2026-27, which represents a half-year impact, and about $1.98 billion in fiscal year 2027-28 with amounts increasing in the years following. [18] The state would only be able to spend the revenue on K-12 public education, healthcare, and early childhood education and care, as outlined below.

Due to the additional income tax collected, this amendment would generate additional revenue for the Healthy School Meals for All cash fund. An estimated $32 million would be transferred to this fund in fiscal year 2026-27 and about $64 million would be transferred in fiscal year 2027-28. [19] This cash fund provides funding to provide free school lunches to children in public schools across the state.

All new state tax revenue generated by this amendment will be deposited into the newly created Colorado Future’s Account. The language in the amendment specifies how the new funds would be spent if this passes. There are three main ways these funds will be spent:

K-12 public education
- a. Improve K-12
- b. Increase access to career and technical education programs
- c. Increase teachers’ pay
2. Publicly funded healthcare
- a. Programs to help families afford healthcare
- b. Replace Medicaid funding lost due to recent federal legislation and pay for the implementation of new federal requirements
- c. Increase funding for primary care, behavioral health and rural health care
- d. Support health care, long-term care, and other supports for older adults and people with disabilities
- e. Programs that increase access to nutritious food
3. Early childhood education and care
- a. Programs to help families afford child care
- b. Increase pay and support for the child care workforce
- c. Improve access to high-quality early childhood education programs

The measure specifies that new revenues are to supplement, not supplant, existing funding in these areas. The measure does not require specific dollar allocations to each area. If the measure passes, the General Assembly, in consultation with the Governor, would determine how the funds are allocated.