This year’s progressive proposals for tax reform in Colorado raise serious concerns about their fiscal impacts, especially when combined.
I have written separately about the problems with both the progressive income tax proposal and the assault on the Taxpayer’s Bill of Rights (TABOR) in Senate Bill 135, but taken together, they are a whole other animal.
By the Numbers
Initiative 195, the current iteration of the progressive tax measure that leftist groups hope to get on the 2026 Colorado ballot, would increase taxes by approximately $2.7 billion annually, with the proceeds directed to K-12 public education, health care, and early childhood and education services.
Additionally, the revenue raised by 195 would not be subject to revenue limits under TABOR, meaning the windfall of new tax dollars would not be counted toward the refund of overcollected revenue to taxpayers.
SB-135, if passed by the legislature and authorized by voters at ballot, is projected to allow the state to keep and spend approximately $1.1 billion in its first year that would otherwise be returned to taxpayers, with a little over $200 million of that directed to education and the rest a blank check for state lawmakers to spend as they wish.
However, because the new limit would depend on prior-year education funding, the state could theoretically retain anywhere up to $4.8 billion in the first year.
So, if voters approve both measures, it could mean a $3.8 billion tax increase (an almost 22 percent TABOR-exempt bonus to the state budget) in the first year based on the forecasts.
Assuming both measures pass, it’s unclear if the education funding collected by the progressive income tax counts toward state education funding for the purpose of calculating the new TABOR limit in subsequent years.
If so, TABOR revenue limit growth could exceed $8.6 billion in subsequent years (nearly 50 percent of the 2026-27 fiscal year General Fund budget), continuously increasing based on population growth, inflation, and prior-year education spending.
The Impacts
According to Colorado Revised Statutes, if two ballot measures with conflicting policies are both passed by voters in a given election, the measure with the higher number of votes supersedes the other.
Unfortunately, because the measures do not conflict significantly, if both measures were to pass (and make it through potential litigation), Coloradans could see what amounts to an end to voter consent over taxation, a substantial increase in taxes, a potentially permanent loss of TABOR refunds, and an unprecedented blank check to Colorado’s state government, regardless of which measure receives more votes.
The unintended consequences of each measure are concerning enough when considered in isolation, but together they are a disaster for Coloradans’ pocketbooks and the state’s economy.
