A graduated income tax is a system where tax rates increase as income increases. People who earn less contribute less, while people who earn more contribute more. Most states already use a graduated income tax.

Colorado currently uses a flat tax system(4.4%), and this proposal would allow voters to decide whether to adopt a graduated income tax instead.

Under the proposal, only the highest-income households would pay higher tax rates. Households earning more than $500,000 annually would contribute more, while 97% of Coloradans would pay less.

Estimated Revenue: $2.0 billion ($2.7 billion max)

Eligible Uses: K-12 Public School Education, Health Care, Early Child Care and Education

The reason that the table shows a tax decrease for those making between $500k and $1m has to do with the interaction of Adjusted Gross Income (AGI) and Colorado Taxable Income (CTI). The income is based on AGI, which is what is used to start filing taxes. After deductions and exemptions, many people – especially those with higher incomes – are able to reduce their taxable income through those deductions and credits. Because of this, many people who make more than $500k have a taxable income lower than that, and would therefore qualify for a tax cut. Additionally, most people within that income band are clustered closer to the $500k range, making the deductions even more impactful there. SO, when you hear us say that only people making more than $500K will see a tax increase, that’s because we are talking about Colorado Taxable Income (versus Adjusted Gross Income.) It’s important to note this quirk has already been taken into account in the $2 billion estimated revenue. 

The new tax structure would apply to both individuals and corporations. So, small businesses making below $500k per year will actually see a tax cut. A new analysis by the nonpartisan Institute on Taxation and Economic Policy (ITEP) of our graduated income tax measure found that 94% of the revenue from increased corporate taxes would come from non-resident businesses. In other words, of the small portion of corporations that would pay slightly more on net (not gross) revenue of over half a million dollars in a year, the vast majority of them aren’t even based in Colorado.

The proposal is estimated to generate more than $2 billion annually. These funds could be invested in priorities such as public education, child care, health care, and other services that support Colorado families and communities.

The money from the increased taxes will go into the Colorado’s Future Fund. By law, money in that fund can only be used for K-12 public education, health care, and child care. Every year there will be a public audit, report, and hearing to ensure that the funds were used appropriately. There will be significant checks and balances to make sure that the funds are used as intended by the voters.

Colorado’s Constitution currently requires a flat income tax, meaning everyone pays the same rate regardless of income. Adopting a graduated income tax would require voter approval of a constitutional change.

Ballot Title Setting Board
2025-2026

The title as designated and fixed by the Board is as follows:

State taxes shall be increased $2.7 billion annually, in order to increase or improve levels of public services, including K-12 public school education, health care, and early child care and education services, by an amendment to the Colorado Constitution and a change to the Colorado Revised Statutes repealing existing law and creating new law to replace the uniform state income tax rate with a graduated income tax structure, and, in connection therewith, amending the Taxpayer’s Bill of Rights to eliminate the constitutional requirement for all taxable net income to be taxed at one rate with no added tax on income; establishing various income tax rates based on the amount of taxable income earned by individuals, estates, trusts, and corporations, while maintaining the current 4.4% tax on income from the sale of a principal residence, which will result in the estimated change in income taxes owed by individuals as identified in the following table; and authorizing the state to retain and spend any increased revenue from the new tax structure, as a voter-approved revenue change, to supplement current levels of funding for K-12 public school education, health care, and early child care and education programs:

Initiative 195
Change in Income Taxes Owed by Income Category

The ballot title and submission clause as designated and fixed by the Board is as follows:

Shall state taxes be increased $2.7 billion annually, in order to increase or improve levels of public services, including K-12 public school education, health care, and early child care and education services, by an amendment to the Colorado Constitution and a change to the Colorado Revised Statutes repealing existing law and creating new law to replace the uniform state income tax rate with a graduated income tax structure, and, in connection therewith, amending the Taxpayer’s Bill of Rights to eliminate the constitutional requirement for all taxable net income to be taxed at one rate with no added tax on income; establishing various income tax rates based on the amount of taxable income earned by individuals, estates, trusts, and corporations, while maintaining the current 4.4% tax on income from the sale of a principal residence, which will result in the estimated change in income taxes owed by individuals as identified in the following table; and authorizing the state to retain and spend any increased revenue from the new tax structure, as a voter-approved revenue change, to supplement current levels of funding for K-12 public school education, health care, and early child care and education programs?

Initiative 195
Change in Income Taxes Owed by Income Category

Hearing January 21, 2026

Single subject approved; staff draft amended; titles set (3-0).
The Board finds that the proposed initiative only repeals, in whole or in part, a provision of the state constitution and therefore does not require a 55% majority for passage.
Board members: Theresa Conley, Christy Chase, Kurt Morrison
Hearing adjourned 12:24 PM.

Rehearing February 4, 2026

Motions for rehearing (Fields, Menten, Sopkin, Hancock) denied in their entirety (2-1, Morrison).
Motion for rehearing (proponents) granted to the extent reflected in the change to the title (3-0).
The Board finds that the proposed initiative only repeals, in whole or in part, a provision of the state constitution and therefore does not require a 55% majority for passage.
Board members: Theresa Conley, Christy Chase, Kurt Morrison
Hearing adjourned 12:08 PM.

* Unofficially captioned “Graduated Income Tax” by legislative staff for tracking purposes. This caption is not part of the titles set by the Board.

We encourage every voter to review the proposal for themselves. You can read the full initiative language and supporting materials on our website to learn more about how the proposal would work.

Initiative #195

There are many ways to get involved. You can sign the petition, attend an event, volunteer, help verify signatures, donate, or share information with friends and neighbors about Colorado’s graduated income tax proposal.