Income Tax Rate Limit

Colorado's current statutory individual and corporate income tax rate is a flat 4.4%.

Over the past decade, the rate has steadily decreased: * 2016 to 2019: The rate was 4.63%. * 2020: Voters passed Proposition 116, lowering it to 4.55%. * 2022: Voters passed Proposition 121, lowering it to 4.40%. * 2024: The legislature temporarily reduced the rate to 4.25% to refund excess revenue under the Taxpayer's Bill of Rights (TABOR). * 2025 and 2026: The statutory rate returned to 4.4%, though TABOR allows future temporary reductions if surpluses occur.

Colorado is one of several states with a flat income tax rate. According to the Tax Foundation, Colorado's tax system ranks 33rd nationally in its 2026 State Tax Competitiveness Index. While the 4.4% rate is relatively low compared to states with graduated brackets, a 2026 Common Sense Institute report notes Colorado relies heavily on fee revenue to fund state services.

Proposition 136 would establish the 4.4% rate as a permanent maximum. Supporters say this protects taxpayers and blocks Amendment 87's proposed higher rates on top earners. Opponents argue capping the rate restricts the state's ability to fund public services.

If voters approve both measures, Colorado law dictates that the measure receiving the most "yes" votes prevails on the specific points where they conflict.

Proposition 136 is a statutory measure, meaning it only changes state law, and it caps the income tax rate at 4.4 percent. Amendment 87 does two things: it amends the state constitution to allow graduated tax rates, and it changes state law to set new rates up to 8.4 percent for high earners, according to a 2026 analysis by the Tax Foundation.

If both pass, the outcome depends on the final vote totals. If Amendment 87 gets more votes, its higher tax brackets will take effect, overriding the 4.4 percent cap. If Proposition 136 gets more votes, the constitution would still be amended to allow graduated taxes, but the new statutory rates above 4.4 percent would be blocked.

Because the two measures mix constitutional and statutory changes, legal experts interviewed by 9News in 2026 note that the exact resolution would likely end up in court. A judge would have to decide how to harmonize the conflicting provisions and determine which parts of each measure take precedence.

Proposition 136 does not change the existing constitutional requirement that voters must approve any state tax increases.

Under the Taxpayer's Bill of Rights (TABOR), a 1992 amendment to the Colorado Constitution, state lawmakers cannot raise the income tax rate without asking voters on a ballot. Proposition 136 is a statutory measure, meaning it changes state law rather than the constitution. Therefore, it does not alter this constitutional rule. If Proposition 136 passes, any future proposal to raise the income tax above 4.4 percent would still require voter approval.

The measure's primary interaction is with Amendment 87, a competing 2026 ballot initiative. Amendment 87 would remove TABOR's flat-tax requirement and create a graduated income tax, where higher earners pay higher rates. It would raise rates up to 8.4 percent on income over $500,000. If voters approve both measures, the one that receives the most "yes" votes will cancel out the conflicting parts of the other.

Supporters, such as Advance Colorado, argue that putting the 4.4 percent cap into state law provides economic certainty for workers and businesses. Opponents, including the Colorado Fiscal Institute, argue the measure is unnecessary because TABOR already requires voter approval for tax hikes. They say it is simply an attempt to block Amendment 87's tax increases on higher earners.

There is no single official count of states with a statutory cap, meaning a limit set in regular state law, or a constitutional cap on their maximum individual income tax rate, but several states have established these limits.

According to Ballotpedia and state legislative documents, examples include: * North Carolina: Capped at 7 percent by a 2018 constitutional amendment, with voters deciding on a 2026 ballot measure to lower this cap to 3.5 percent. * Georgia: Capped at 6 percent by a 2014 constitutional amendment. * Louisiana: Capped at 4.75 percent by the state constitution.

Additionally, the Tax Foundation reports that nine states levy no individual income tax on wages as of 2026. According to Ballotpedia, several of these, including Florida, Tennessee, and Texas, have constitutional bans on personal income taxes, effectively capping the rate at zero. South Dakota has a statutory ban.

Colorado currently taxes individual income at a flat rate of 4.4 percent. Proposition 136 would establish a statutory cap at this rate. Supporters argue caps protect taxpayers from future rate hikes. Opponents argue caps restrict a legislature's flexibility to raise revenue for services or during economic downturns.

The individual income tax generates roughly two-thirds of Colorado's General Fund, which translates to about one-third of the state's total annual budget.

The General Fund is the state's main operating account. Because Colorado's total revenue also includes federal grants, corporate taxes, sales taxes, and fees, the individual income tax is just one piece of the overall funding picture. According to a 2026 analysis by the Tax Foundation, individual income taxes make up 17.0 percent of Colorado's combined state and local tax revenue.

While the statutory rate is 4.4 percent, temporary reductions tied to the state's revenue limit lowered the effective rate to 4.25 percent for the 2024 and 2025 tax years.

Proposition 136 would permanently cap the rate at 4.4 percent. Supporters say the cap protects taxpayers from future hikes and preserves the state's flat-tax structure, where everyone pays the same rate. Opponents note that the cap is primarily designed to block Amendment 87, a competing 2026 ballot measure. Amendment 87 would replace the flat tax with a graduated system, raising rates on income over $500,000 to fund public services.

There is no reliable official count of how many Colorado taxpayers report an annual income over $500,000 in the 2026 state ballot materials or recent fiscal notes. Voters must instead rely on percentage estimates.

According to the Colorado Fiscal Institute and supporters of Amendment 87, 97 percent of Colorado taxpayers would receive a tax cut under the proposed changes in 2027. This implies that at most 3 percent of taxpayers earn enough to see an overall tax increase.

Amendment 87 would replace Colorado's flat 4.4 percent income tax rate with a graduated system. A graduated system taxes different portions of income at different rates. It would lower rates on the first $100,000 of taxable income and raise rates on income above $500,000.

Proposition 136 would cap the state's income tax rate at the current 4.4 percent. Advance Colorado, the group behind Proposition 136, argues that capping the rate protects the state's Taxpayer's Bill of Rights framework and prevents tax increases on any group. If both measures pass, the one with the most votes will take effect.