Initiative 195, the proposed ‘progressive’ income tax ballot measure, promises long-term pain for Colorado taxpayers due to what economists call “bracket creep.”
But we do not need to speculate about the impact of bracket creep, as we can already see its effect in action since voters passed Proposition FF in 2022.
Proposition FF
Through Proposition FF, voters decided to increase taxes on high-income Colorado earners to support a universal school lunch program.
The measure capped state deductions for tax filers with a federal adjusted gross income exceeding $300,000 and directed new revenue to the Healthy School Meals for All (HSMA) program.
Like Initiative 195’s new marginal brackets, the $300,000 threshold set by Prop FF was not indexed to inflation.
According to the Department of Revenue’s Statistics of Income Reports, there were 127,185 Coloradans who earned over $300,000 in 2022.
Just a year later, in 2023, that number increased by 10,509 to 137,694 Coloradans.
In the one year from Prop FF’s passage, from November 2022 to November 2023, average hourly earnings increased by 4.47 percent nominally.
However, in that same period, inflation rose by approximately 4.5 percent.
That means that real wages (or people’s purchasing power) actually decreased by about 0.03 percent when adjusted for inflation.
Hypothetically, a filer earning $287,164 in November 2022 likely saw their nominal income increase by about $12,836—pushing them into the $300,000 threshold by November 2023—while their real purchasing power actually decreased by about $86.
Despite having less purchasing power than before, that filer would immediately face higher taxes to fund HSMA.
While some of the over 10,000 filers may have been new Colorado arrivals or experienced genuine real-income gains, the fact that average real wages were essentially flat makes it clear that inflation-driven nominal growth was a major driver of that expansion.
Thus, Prop FF was a major hidden tax increase for thousands of Coloradans when passed.
Moreover, when Prop FF passed, it was expected to impact 5 percent of tax filers. When legislators brought Prop MM to voters in 2025 (further increasing taxes on those filers), that number had already risen to 6 percent.
Initiative 195: More of the Same
Whereas Props FF and MM targeted only “wealthy” Coloradans, the same bracket creep problems will quickly be distributed among all Coloradans under Initiative 195.
With time, the lackluster tax cuts promised will become less and less pronounced and, given even more time, Initiative 195 will be a major tax hike on numerous Coloradans through no fault of their own.
Even if a progressive tax system were somehow preferable to a flat tax system (though that’s clearly not the case), the fact that 195’s brackets are not indexed to inflation makes it fatally flawed.
We have a duty to leave Colorado better than we found it for future generations, especially since they don’t have a say in this decision, and Initiative 195 unequivocally makes Colorado worse off in the long term.
