Amendment 87 (formerly Initiative 195), the Colorado ballot measure aimed at trading the state’s flat 4.4% income tax rate for six new marginal tax brackets, is fatally flawed.
As previously explained, the measure’s new tax brackets would not adjust with inflation, leading to what economists call “bracket creep.”
What that means is that as people’s incomes rise, partly from real wage growth but largely due to inflation, they get pushed into higher tax brackets even as inflation eats away at how much their incomes can actually buy.
Colorado has seen a recent example of bracket creep with Proposition FF, which, in just one year, increased taxes for thousands of Coloradans even though they actually became poorer in real terms.
Because of the complexity of bracket creep, it is worth explaining it several times and in several ways, as it will result in Amendment 87 becoming a long-term tax hike for all Coloradans, despite proponents’ claims that it is a tax cut for the majority of tax filers.
A Hypothetical
So, let’s imagine a scenario in which Colorado had already adopted Amendment 87’s tax brackets over the last ten years of available IRS tax data (2013-2023), and examine the numbers by each bracket.
As Table 1 shows, the number of Coloradans earning less than $100,000 decreased from 2013 to 2023, while the number of Coloradans earning more than $100,000 increased.
Table 1
| Brackets | 2013 % of
Filers |
2023 % of
Filers |
Change |
| $0-$25K | 35.61% | 24.81% | –10.80% |
| $25K-$100K | 46.94% | 46.27% | –0.67% |
| $100K-$500K | 16.72% | 27.18% | +10.46% |
| $500K-$1,000,000 (IRS Data does not
break down this range further) |
0.50% | 1.23% | +0.73% |
| $1,000,000 plus | 0.23% | 0.51% | +0.28% |
Colorado’s total tax filer base grew by 23% from 2013 to 2023 (2.5 million to 3.09 million), but filers that Amendment 87 specifically targets (those earning more than $500,000) increased by 194% in the same period (18,230 to 53,640)—about eight times faster than the growth of Colorado’s overall tax-filer base.
Aside from the fact that the data shows a clear trend of Coloradans generally getting wealthier, the remaining problem that underscores the significance of “bracket creep” in this scenario is how inflation erodes people’s purchasing power.
As Table 2 shows, while the brackets remained fixed, purchasing power in 2023 is only about 72% of its 2013 value.
Table 2
| Bracket thresholds in 2013 | Real value in 2013 dollars | Bracket thresholds in 2023 | Real value in 2013 dollars |
| $25,000 | $25,000 | $25,000 | $18,014 |
| $100,000 | $100,000 | $100,000 | $72,057 |
| $500,000 | $500,000 | $500,000 | $360,287 |
| $750,000 | $750,000 | $750,000 | $540,430 |
| $1,000,000 | $1,000,000 | $1,000,000 | $720,574 |
For example, a $1,000,000 tax filer in 2023 would be taxed at an 8.4% top rate, but should be taxed at a 7.4% top rate if the brackets were adjusted for inflation—two brackets lower—with a purchasing power of only $720,574 in 2013 dollars.
The purchasing-power gap grows in dollar value at the higher income thresholds. For example, the nominal $500,000 threshold would correspond to only $360,287 in 2013 purchasing power—a $139,713 difference—while the highest threshold would see a $279,426 difference.
If these trends continue, projections indicate that by 2036, about half of Colorado’s filers will earn more than $100,000. But again, their purchasing power will be only about $49,100 in 2013 dollars, assuming a 3% inflation rate.
The Adult Marshmallow Test
There is a famous psychological experiment that tests kids’ ability to delay gratification by offering a child a marshmallow and promising them two if the child can wait 15 more minutes.
Adults love to watch and laugh at the struggle kids have resisting the urge to eat the marshmallow.
Amendment 87 is that same test, but for adults.
Will Coloradans vote to “tax the rich” and slightly lower their own taxes in the short-term, at the expense of the broader economy and their own long-term tax burden?