Amendment 87 Cuts Taxes for Colorado's Average Household

The obvious take on Amendment 87 is that it’s a tax hike. That the state wants more of your money, and you should be worried. But look at the math for a single moment. For the average household in Colorado, this amendment is actually a tax cut.

The proposal, which hits ballots this November, would replace Colorado’s flat 4.4% state income tax rate with a progressive system using six tax brackets, as reported by the Colorado Sun. The first $100,000 of taxable income would be taxed at 4.2% or less. The rate only starts climbing for money earned above $500,000, reaching a maximum marginal rate of 8.4% for incomes over $2 million.

To hear the numbers tell it, a household with $75,000 in taxable income would see their taxes drop by $275 a year. A household at $150,000 would get a $325 reduction. The increase only kicks in for the upper end: a family earning $550,000 would pay an additional $1,175 annually. Someone earning $10 million a year would see their tax bill jump by $376,000.

The question is whether those high earners will stay in the state or leave. That depends on who you ask, but the structural change is significant. Amendment 87 removes a specific prohibition from TABOR (Taxpayer’s Bill of Rights), which has been in the state constitution since 1992. By eliminating the requirement that all income be taxed at the same rate, Colorado would align its tax code with the federal government and most other states.

The state needs the revenue. Colorado has faced annual budget deficits of $1 billion or more in recent times. The amendment aims to raise approximately $2 billion a year, which the state could direct toward healthcare, K-12 education, and pre-K childcare.

One technical detail matters for voters: constitutional amendments usually require 55% of the vote to pass. Amendment 87 only needs a simple majority. This is because it removes existing language from the constitution rather than adding new text; the specific tax brackets would be established in state law, not the constitution itself.

The median household income in Colorado is $102,000. However, because of deductions, the taxable income for most people is lower than their total earnings. This means the 4.2% rate on the first $100,000 applies to a larger slice of the population than just those earning exactly that amount.

For folks around here, the decision isn’t really about whether you want to pay more taxes. It’s about who pays for the deficit. The state is asking the top tier to cover the gap so that everyone else gets a small break. It’s a trade-off, and it’s a big one for the state’s fiscal future.

The Colorado Sun notes that this would be one of the most significant changes to TABOR since its inception. The state is betting that a slightly higher rate on the very top earners will stabilize the budget without spooking the middle class.

As for whether that bet pays off, the voters will decide in November. The state’s outlook depends on it.