A pair of measures that Democrats are aiming to place on the November ballot would significantly alter the foundation of Colorado’s tax code, upending the Taxpayer’s Bill of Rights.
Taken alone, either of the two proposals — a graduated income tax that requires the wealthy to pay more and another that raises the state’s spending cap dramatically — would represent a fundamental change to the state’s rigid tax structure. Taken together, the measures ask voters to reimagine how taxes are collected and spent.
The potential benefits would go to education, in particular, as well as to health care, child care and a slew of other state services that Democrats say have been shortchanged by a system that has been largely untouched for nearly 20 years.
The measures would also mean tax increases for the wealthiest Coloradans, changes to the slew of tax credits that draw on the state’s surplus tax collections, and a potential end to the sales tax refunds that the state frequently issues with tax returns.
The two ballot measures, one a potential referred measure backed by the Colorado Education Association and the other an outside initiative by the progressive Bell Policy Center, wouldn’t directly compete with each other, backers said. But the two proposals would ask voters big, similar questions as Democrats try to solve what they see as major structural problems with state finances.
“They both attack the problem in different ways,” said Kevin Vick, the president of the CEA, the largest teachers union in the state, at a rally Thursday outside the state Capitol to support changing the state spending cap. “They don’t compete with each other in ways they attack the issue.”
But he acknowledged: “We’re still working through what having both of them on the ballot may mean for voters.”
The CEA proposal, which would raise the state spending cap set by the TABOR Amendment in the state constitution, likely faces an easier path to the ballot than the graduated income tax proposal.
TABOR, which Colorado voters adopted in 1992, restricts growth in government using a formula that factors in population growth and inflation. The CEA proposal would ask voters to exempt the state share of K-12 education funding from that cap — in effect giving the state a $4.5 billion buffer before it needs to refund money — while promising to increase education funding by at least 2% per year. The buffer could last for years.
Those billions wouldn’t suddenly materialize in the state budget. The most recent economic forecast from the legislature predicts the state will be $501 million over the cap in the next fiscal year, which starts July 1, and $807 million over in the following fiscal year.
Under this proposal, the state would be able to keep that money instead of refunding it.
Kelly Johnson, an educator from Delta High School, speaks during a Colorado Education Association news conference announcing a bill that would put the TABOR spending cap up to a vote on the November ballot at the Colorado State Capitol’s west steps in Denver on Jan. 22, 2026. (Photo by RJ Sangosti/The Denver Post)‘An outdated and arbitrary revenue cap’
Democrats, who outnumber Republicans in the legislature by a ratio of nearly 2-to-1, frequently argue that the TABOR cap unnecessarily hamstrings the state in paying for public services, from roads to health care. The proposal, which has yet to be officially filed but has been talked about since the legislative session began Jan. 14, could land on ballots with a simple majority of support from lawmakers.
“This is something that hasn’t changed in decades,” said Sen. Jeff Bridges, a Greenwood Village Democrat who will sponsor the measure. He said it was time to take the issue to voters and give them the choice of keeping the spending cap or raising it to enable the state to “lower class sizes, increase teacher pay and make sure our kids are ready for the workforce.”
“This is the time for Coloradans to ask themselves, ‘How much do we care about our kids?’ And to figure out what we need to do as proper and adjusted investments,” added state Rep. Jennifer Bacon, a Denver Democrat who plans to sponsor the bill when it’s introduced. “One thing I do know about Coloradans is we do care about our kids, and we care about our kids across the state.”
In recent years, a bipartisan group of lawmakers has celebrated the end of the so-called budget stabilization factor, or the budgeting maneuver that long allowed the state to fund K-12 education below the constitutionally required amount. The legislature also passed a rewrite of the state’s school finance funding formula to try to better direct the state’s contribution.
While state education funding is no longer lower than the constitution requires, advocates note that it’s still at inflation-adjusted 1989 levels — a time before families expected Chromebooks and mental health services.
Now, the state is between $3.5 billion and $4.1 billion short when it comes to adequately funding education, according to two studies released early last year.
At the rally on Thursday, Vick, from the teachers’ union, tied education funding to the TABOR cap.
“For more than 30 years, an outdated and arbitrary revenue cap has kept our state funding tied up so tightly that we can’t invest in public education and keep up with student needs,” Vick said.
The measure, if adopted by voters in roughly the shape envisioned by its backers, would immediately boost public education funding by between $90 million and $100 million, Vick said, with annual increases after that.
It wouldn’t be “the final piece” to achieving full funding of education, he said, “but we need to provide some relief now and get this increase in funding started, so we’re not losing generations of kids to this crisis.”
Aspiring educator Amaya Mills, top, works with first graders in a reading class at Ponderosa Elementary School in Aurora, Colorado, on Tuesday, Oct. 29, 2024. (Photo by Hyoung Chang/The Denver Post)The change would also free up potentially billions of dollars in flush years for the state to spend on other priorities, like its ever-growing Medicaid costs — and keep the money from being directly returned to Coloradans via the sales tax refund that’s typically issued with tax filings or through the litany of tax credits lawmakers have passed recently, including the Family Affordability Tax Credit. That one has been credited by draft study with lowering childhood poverty rates significantly in its first year.
Gov. Jared Polis, who often advocates for cutting taxes, hasn’t officially weighed in on the CEA’s outlines for the measure, though his signature wouldn’t be necessary for the legislature to refer it to the voters.
In an interview with The Denver Post earlier this month, he signaled some caution because, as it stands now, there are simply some years when the state doesn’t hit the TABOR cap — meaning there wouldn’t be extra money anyway.
“Generally speaking, two years out of every 10 or so — usually because of a recession, but it could be because of federal tax changes — we don’t have a TABOR surplus,” Polis said. “So I would just want to highlight that if you’re talking about base spending, it might work seven or eight years out of 10.”
Kristi Burton Brown, the vice president of the Advance Colorado Institute, a conservative think tank that often opposes measures it sees as an attack on TABOR, said the math doesn’t add up for this proposal. Raising the spending cap by $4.5 billion, while earmarking only $100 million of the increased spending capacity for education, could result in the creation of a “slush fund,” she warned — while it also “basically destroys the possibility of ever getting TABOR refunds again.”
Another question remains: Will voters go for it?
Voters have rejected recent attempts to adjust the TABOR cap. Proposition CC, with its promise to dedicate funding to education and roads, went down in 2019. Four years later, Proposition HH — despite promises to boost education funding and soften property tax increases — also failed.
Backers argue this new proposal asks voters a more direct question — Can the state keep money to pay for education? — than those failed efforts.
Burton Brown argues the earlier questions were direct enough, and directly answered by voters with a resounding “No” when the electorate saw them as end-runs around TABOR.
“While voters like those things (that were promised), I don’t think voters are willing to give up their TABOR refunds, give up the cap on state revenue to do that,” Burton Brown said.
The measure also may not be the only question about changing state taxes on the ballot in November.
Income tax measure would change flat rate
The Bell Policy Center, a progressive think tank in Denver, recently won preliminary approval from the state’s title board for its proposed ballot measure.
It would change the state’s income tax code from a flat-rate tax — where every Coloradan pays the same percentage of their income, currently 4.4% — to a graduated rate where lower-income people pay a smaller percentage in taxes while wealthier Coloradans pay a higher rate.
The center’s proposal would result in lower-income taxpayers paying a lower tax rate than they do today, while wealthier taxpayers would pay more, with the rate increasing with each income bracket. The first $25,000 a person earns would be taxed at 3.7%; income over $25,000 but less than $100,000 would be taxed at 4.2%; and income between $100,000 and $500,000 would be taxed at 4.4%. Only money earned beyond that $500,000 mark would be taxed at a higher rate of between 7.4% and 8.4%.
For the vast majority of Coloradans — an estimated 97% — the proposal would mean a tax cut, Bell Policy Center President Chris deGruy Kennedy said. It would also earmark money collected over the current TABOR cap to be spent on child care, health care and education.
The proposal still needs final approval from the title board — including facing likely challenges from Burton Brown’s group — before backers can begin gathering signatures.
“This is not just a lefty thing. This is the way taxes are done in more than half the states of this country,” including Republican states, deGruy Kennedy said. “We just want to restore an income tax system that relieves undue pressure on the lowest-income Coloradans.”
The Bell measure and the teachers union’s measure would propose changes to different parts of the tax code. Supporters of each are keenly aware that they’d be asking big questions of voters.
DeGruy Kennedy said the two measures would build off one another — not compete — and “allow the state to make very, very meaningful investments.” Voters have a history of deciding each ballot measure separately, but it’s an open question as to how the electorate would see these two interplaying, he said.
But for Burton Brown and other conservatives, the proposals would amount to “completely wrecking the tax code that people have really relied on and really liked for a long time in Colorado.” She warned of the additional strain it would put on a precarious state economy.
“Obviously, if either gets on (the ballot), they need to be fought with serious campaigns against them so voters aren’t deceived by bad messaging that doesn’t give them the full picture,” Burton Brown said.
Other tax questions, and the governor’s view
While those efforts play out, Democratic lawmakers are also working on several measures to further tweak the state’s tax code. They want to close or limit business-friendly tax incentives in the hopes of bolstering the rest of the budget.
The package is still being drafted, and it’s unclear how much money the proposals might raise. But lawmakers say they intend to direct that money toward what may become a new program to support families, in a similar vein to the successful Family Affordability Tax Credit passed two years ago.
“We know that families are struggling right now, and do we want to give corporations more tax breaks? Or do we want to be able to put money in the hands of struggling families?” said Rep. Yara Zokaie, a Fort Collins Democrat involved in drafting the bills. “I think it’s important that we put money here.”
One bill would eliminate a sales tax exemption that the state applies to software purchased online (sales tax is already assessed on software purchased in stores). Another, sponsored by Zokaie, would further limit deductions that corporations can take on executive compensation and a tax provision that lets companies deduct current-year losses from future years’ income.
The third bill would decouple the state from four federal tax incentives that were created or expanded under the tax-and-spend bill passed by Congress and signed by President Donald Trump in July, said Rep. Lorena Garcia, an Adams County Democrat.
The package would partially build on tax reforms lawmakers began to pass last year, both during the regular session and the budget-bandaging special session in August.
In his final State of the State address this month, Polis made his own pitch for tax reform — by inviting lawmakers to support an income tax cut.
Speaking to reporters afterward, the governor gestured at the coming tax package from his fellow Democrats and indicated he’d support it if lawmakers included another “significant” income tax reduction, on top of others passed by voters in recent years.
“This would be part of a comprehensive tax-reform package,” he said. “So, reducing special interest tax loopholes, using some of the proceeds for reducing the income tax and other proceeds for other progressive tax credits.”
He later elaborated that he would want any tax package to include a broader tax cut — such as to income tax rates, property taxes or sales taxes — along with targeted programs, like the Family Affordabilty Tax Credit.
To pass the family affordability credit in 2024, legislators begrudgingly agreed to an income tax cut sought by Polis that’s conditional, depending on the size of TABOR surpluses.
But this year, some lawmakers said they were not interested in a similar deal.
“I’m always happy to negotiate with the governor,” Garcia said. “I will never give in to an income tax cut. Period.”
In a statement Thursday, Polis spokesman Eric Maruyama said the governor “looks forward to working with the legislature to help Coloradans keep more of their hard-earned money, close corporate tax loopholes, and streamline our tax code.”
“While it’s early in session, the governor’s office is in active conversations with sponsors over what it would take to get the governor on board,” Maruyama wrote, “and he encourages everyone to keep an open mind on saving people money.”
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