Midterm results are still pending in some states, but it’s quite clear that voters across the country overwhelmingly elected Democrats, in a repudiation of the current crop of Republican lawmakers.
But for those of us who support lower taxes and spending, there is bad news in at least one state’s results.
In 1987, Colorado was the first state to adopt a flat income tax rate for both individuals and businesses. “A decade later, its per capita income was about 5 percent higher than comparable states that kept graduated rates,” Adam N. Michel, director of tax policy studies at the Cato Institute, wrote in September.
Today, Colorado’s tax rate is 4.4 percent, lower than most of its neighbors.
Then in 1992, voters passed a ballot initiative adopting the Taxpayer’s Bill of Rights (TABOR) into the state constitution. According to the measure, TABOR would “require voter approval for certain state and local government tax revenue increases and debt” and “limit the rate of increase in state and local government spending,” among other things.
“Its preferred interpretation shall reasonably restrain most the growth of government,” read the text as enshrined in the Colorado Constitution. To that end, it capped spending increases by state and local governments at the rate of inflation plus the percent of population growth. If spending in either case exceeded those limits, “the excess shall be refunded in the next fiscal year.”
Together, these made Colorado an attractive place to live and work, in addition to its natural beauty. For the 2024 fiscal year, TABOR refunded $1.7 billion to state taxpayers.
But this year, a couple of state ballot measures sought to change that.
Amendment 87 would replace the state’s flat rate with a six-tiered progressive income tax, ranging from 3.7 percent on the low end to 8.4 percent for income over $1 million.
Supporters estimated it would raise an additional $2 billion for the 2027–28 fiscal year, noting that taxes would only go up for those making more than $500,000 per year—of whom the state estimates there are just over 100,000. The Protect Colorado’s Future Coalition, a coterie of progressive think tanks that sponsored the amendment, bragged that 97 percent of state taxpayers would see lower rates.
But as The Wall Street Journal editorialized last week, “That’s misleading. The brackets wouldn’t be adjusted annually for inflation, so middle-class residents will get soaked more each year as their incomes grow over time. So would small businesses, which typically pay tax at individual rates on pass-through income. If they have a good year or sell their business, they’d be punished with a hefty tax bill.”
Of course, under TABOR, the state can’t squeeze an extra $2 billion out of taxpayers anyway, without giving it right back. So a separate measure, Proposition NN, would permanently raise the TABOR cap by billions of dollars.
According to an analysis by the Legislative Council Staff, a nonpartisan research entity within the Colorado General Assembly, “The state is projected to collect $20.99 billion in revenue subject to TABOR in FY 2026-27 and $22.08 billion in FY 2027-28.” Those amounts would exceed the TABOR cap by $483 million and $674.1 million, respectively, and under current rules must be refunded to taxpayers.
Proposition NN would raise the TABOR cap by $4.6 billion in just its first year. TABOR refunds would go away in the near term, and the state would spend that money on other priorities: It would use $200 million to reimburse local jurisdictions for property tax breaks, and of the remainder, half would go to K–12 education—the measure guarantees a minimum 2 percent annual increase—with the other half going to children’s programs of lawmakers’ choice.
After a decade, though, that latter tranche could be used completely at lawmakers’ discretion, without having to go to anything relating to education.
Perhaps unsurprisingly, the Colorado Education Association—the state’s largest teachers union—supported the measure. Proposition NN “does not raise taxes,” it explained, and “does not change anyone’s tax bracket.”
Of course, Amendment 87 would do both of those things—and the union endorsed that measure, as well. Besides, it’s not like zeroing out everyone’s annual tax refunds is meaningfully different from raising their rates.
“The state’s official analysis says Amendment 87 would have no impact on current TABOR refunds or the mechanisms used to calculate them,” according to the Colorado Fiscal Institute, which advocates reforming or repealing TABOR.
But the state also noted that all additional revenue collected under Amendment 87 must “be spent on K-12 education, health care, and early childhood care and education, and [it] exempts this money from” TABOR.
Taken together, the two ballot measures would hike state spending and lower Coloradans’ after-tax income. Millions of state taxpayers would not see a rate hike under Amendment 87, but under Proposition NN, they would no longer be entitled to refunds that have been guaranteed by the state Constitution for three decades.
“Fundamentally, Colorado faces a spending problem, not a revenue problem,” wrote Andrew Wilford of the National Taxpayers Union Foundation. “Even after adjusting for inflation, Colorado’s spending per capita has increased by 31% over the past two decades, a situation that inevitably leads to shortfalls. Attempting to plug these shortfalls on the revenue side is like trying to fix a leaky boat by draining the ocean.”
“Make no mistake, there is absolutely no need for the extra tax dollars [Amendment] 87 and [Proposition] NN would pump into state government coffers,” added The Denver Gazette. “The revenue windfall won’t go to essential services such as Colorado’s crumbling, neglected highways or to public safety—in a state with one of the highest overall crime levels in the country….And NN’s promise to funnel more funding to public schools ignores the unanswered question: What happened to the whopping 41% increase the legislature poured into K-12 spending over the past five years?”
This week, Proposition NN passed by more than 11 percentage points. And with over 95 percent of votes counted as of this writing, Amendment 87 is ahead 51–49.
Proposition 136, a countermeasure affirming the state income tax cap at its current rate, is losing by an even larger margin, 53–47.
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