The sales pitch at the heart of Amendment 87 sounds almost too good to be true.
The graduated income tax measure purports to cut taxes for 97% of Coloradans and 95% of businesses, all while helping to solve the state’s budget crisis by bringing in $2.7 billion a year in new tax dollars from the privileged few.
But can voters really have their cake and eat it, too?
Opponents say they can’t, arguing that tax hikes on the highest earners will eliminate jobs, hurt the economy and be passed along to everyone else in the form of higher costs for goods and services.
But setting aside the economic debate, the basic math behind Amendment 87 checks out, according to nonpartisan legislative analysts. So much income is concentrated among the highest earners, it really is possible to cut taxes on the vast majority of people and businesses and still increase state tax collections overall.
“There is a vast, vast amount of annual income going to the top 3% of earners and top 5% of corporations,” said Chris deGruy Kennedy, president of the Bell Policy Center, the liberal nonprofit that introduced the measure. “We have to understand that that is the state of economic inequality in our country.”
The constitutional amendment would cut taxes for people and small businesses making up to about $500,000 of state taxable income or business profits. The vast majority of people who live in Colorado — around 3 million tax filers, according to state Department of Revenue data — make less than that, so their taxes would go down if Amendment 87 passes.
That leaves fewer than 100,000 households whose taxes would go up — or about 3% of tax filers.
But that small group makes more money than the combined income of the 2.4 million tax filers who make $100,000 or less, according to the state’s income data. Currently, however, the highest earners don’t pay the highest taxes — at least not as a share of their income.
According to the state’s latest tax profile report in 2024, those earning $200,000 or more account for 45% of all the income earned in the state. But they only pay 37% of the taxes.
Add in large businesses — many of which are national firms — and a tax hike on the highest earners more than pays for a tax cut for everyone else, according to legislative analysts.
PART-TIME RESIDENTS, PART-TIME TAXES
There are wide economic disparities even among Colorado’s highest earners.
About 56,000 households make $500,000 to $1 million. Another 46,000 make more than that.
The top 340 households make an average of $280 million a year, according to Department of Revenue data. And if all of those earnings were subject to the higher income tax rates, that would translate to more than $3 billion in new income tax revenue for the state.
But most of it won’t be taxed in Colorado. Because many of the state’s highest earners don’t live here year-round, much of their income gets taxed in other states.
That distinction between full-time and part-time residents has also become a source of confusion for those reading the state blue book’s analysis of the ballot measure, deGruy Kennedy says.
The amendment raises taxes on income higher than $500,000. So in one chart, the nonpartisan voter guide shows a tax increase of $1,175 for someone making $550,000 a year in Colorado taxable income.
A different section of the blue book shows that the average person making between $500,000 and $1 million would actually get a tax cut of $284 if the measure passes.
That’s only possible because so many of Colorado’s higher earners live here part-time. And in many cases, the share of their income that gets taxed in Colorado isn’t large enough to trigger a higher tax bracket.
