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Colorado Tax Policy

Colorado Voters May Change Flat Income Tax

Colorado residents currently pay an income tax of 4.63 percent. In contrast to the progressive income tax systems of the federal government and many states, Colorado has a “flat” income tax system, which means higher earners do not pay proportionately higher income tax rates. Voters of the state, however, may soon change this flat tax system. Amendment 66 will go to voters on November 5, 2013; the proposal would raise the state income tax to 5 percent and to 5.9 percent on the portion of incomes over $75,000. The amendment would also require that 43 percent of revenue from income, sales, and excise taxes be allocated toward public education; currently, educational spending is tied to inflation rather than to a percentage of state revenue. If it passes, Amendment 66 is projected to raise $950 million in its first year.

Supporters of the measure point out that progressivity is a widely-accepted trait of tax systems. They argue that the additional revenue will help Colorado develop the educated workforce needed to sustain economic growth. Opponents of the measure counter than the two-tier tax system with a spread of 0.9 percent between the two brackets will inevitably expand over time once progressivity is enshrined in the law. They also object to suburban districts being forced to subsidize Denver schools; some suburbs will receive only 50 or 60 cents for every dollar of tax revenue raised from them as a result of the amendment.

Local media reports that supporters of the amendment enjoy a healthy edge in funding, due in part to contributions from teachers unions and billionaires Bill Gates and Michael Bloomberg.

UPDATE: On November 5, 2013, Colorado voters defeated the amendment by a 66-34 margin.

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