The Tax Foundation’s 2027 State Tax Competitiveness Index ranks Colorado as the 33rd most competitive in the nation—up from 34th last year.
The modest improvement came less from changes in Colorado tax policy and more from the state’s immediate conformity to federal tax changes.
But with Amendment 87, the progressive income tax, now on the books, Colorado could move down significantly by next year.
Let’s see what this means for the future.
This Year’s Ranking
Colorado performs above average in how it taxes corporations and individuals, but performs worse than most other states in sales, property, and unemployment insurance taxes.
While the state did not change its ranking on individual income and unemployment insurance taxes, it improved in its corporate and sales tax rankings and declined in its property tax ranking relative to the rest of the nation.
It remains the least competitive state among its immediate neighbors, ranking 5 places behind the next-least-competitive state in the region, New Mexico, at 28th.
Meanwhile, Wyoming ranks 1st in the nation, Utah ranks 10th, Oklahoma 15th, Nebraska 16th, Arizona 17th, and Kansas 19th.
Last year, the state fell in its ranking because other states eagerly increased competitive tax policy, while Colorado did not.
This year, Colorado’s rolling conformity with federal tax changes from the One Big Beautiful Bill meant that federal corporate tax changes the state adopted immediately made it more competitive in that regard, slightly boosting its overall ranking.
Additionally, while not as popular, Colorado’s legislature’s decision not to adopt exemptions for taxes on tips and overtime also helped Colorado’s competitiveness, because a broader tax base with fewer exemptions improves revenue and simplicity.
Next Year’s Ranking
Despite this year’s improvement, next year’s ranking could be far bleaker.
With the passage of Amendment 87, it is not beyond the realm of possibility that Colorado could reach the bottom 10 of all states.
Moving from a single rate to six that are not indexed to inflation, with the top marginal bracket among the highest in the country, and introducing a marriage penalty will make taxes more complicated and actually narrow the tax base.
If Colorado otherwise neglects improving competitiveness in areas such as property taxes, where other states will continue to improve, Colorado could quickly become one of the least competitive states in the nation, at a time when in-migration has already begun to grind to a halt.
That, combined with the knock-on effects of a slower economy generally associated with progressive taxation, and billions of dollars taken out of the economy due to Proposition NN, Colorado’s taxpayers could be in for the rudest of awakenings.