Answers to your questions about Amendment 87, Colorado’s graduated income tax ballot measure

Confused about Amendment 87? You’re not alone.

We’ve gotten a lot of questions from readers about the ballot measure, which would swap out Colorado’s flat income tax for a graduated system that charges higher rates the more money someone makes.

Here’s answers to the questions we heard most often in reader emails:

Why does the state blue book seem to contradict the Amendment 87 income tax table on the ballot?

The blue book table shows that taxes would go up for Coloradans earning an annual income of $500,000 or more.

The ballot table shows the average person making $500,000 to $1 million a year would actually pay $325 less in state taxes if the measure passes.

Both are technically correct, according to nonpartisan legislative staff.

Here’s where the confusion comes from:

The chart on the left, found in the state’s nonpartisan voter’s guide, known as the blue book, looks at state taxable income. That’s what will get taxed at the new rates imposed by Amendment 87, which are shown here:

The second chart, found on your ballot, shows Amendment 87’s average effect broken down by adjusted gross income — basically, all of someone’s earnings minus things like retirement savings and student loan payments that aren’t taxed by the federal government. And the average person who makes $500,000 to $1 million in adjusted gross income actually makes a little less than $500,000 in Colorado taxable income, meaning they would get a tax cut under Amendment 87.

Why the big disparity? The main reason is that many of the state’s highest earners only live here part-time, so only some of their income is subject to Colorado taxes. There are also state deductions and exemptions that can reduce people’s taxable income, like subtractions for Social Security benefits, charitable contributions and college savings accounts.

So why does the ballot even have such a confusing chart? State law requires it. In 2021, the legislature passed a bill requiring that voters be told how tax changes would affect people at different income levels. But the income groupings required by the law are based on federal adjusted gross income — not state taxable income.

For most Coloradans, those numbers are going to be very similar. Lawmakers just didn’t anticipate this particular scenario when they passed House Bill 1321.

How would Amendment 87 affect state tax exemptions for Social Security and military veterans?

It wouldn’t.

Opponents of the measure — including Advance Colorado, a conservative political group, and Democratic Gov. Jared Polis — have incorrectly said Amendment 87 would eliminate those tax breaks, but that claim is simply not true.

The origin of it is a misleading interpretation of how Amendment 87 would edit one sentence in the state constitution.

Today that sentence reads:

“Any income tax law change after July 1, 1992 shall also require all taxable net income to be taxed at one rate, excluding refund tax credits or voter-approved tax credits, with no added tax or surcharge.”

In order to implement the graduated income tax, Amendment 87 deletes “at one rate.” It also deletes the dependent clause that follows it — “excluding refund tax credits or voter-approved tax credits.” That’s because, grammatically, the clause is no longer needed.

If Amendment 87 passes, here’s the full sentence that would be left in the constitution:

“Any income tax law change after July 1, 1992 shall also require all taxable net income to be taxed with no added tax or surcharge.”

Opponents have argued that this change would prohibit seniors from claiming existing tax breaks on Social Security and military retirement benefits.

But that’s not true. In reality, the change simply eliminates the requirement that all income be taxed at one rate. And without that requirement, the constitution no longer needs an exception for tax credits.

In a statement to 9News, Polis maintained that it was still possible that Amendment 87 could affect the Social Security tax break, depending on how courts interpret the language.

“What I should have said is that it could, depending on the courts’ interpretation,” he told 9News. “I will be more careful in the future about identifying this as a risk, not a certainty.”

There’s another reason the claim doesn’t hold up to scrutiny: Under the Taxpayer’s Bill of Rights, voters have to be told when a ballot measure would increase their taxes. But the ballot language and state voters guide don’t mention any effect on senior tax breaks.

Getting rid of the tax exemptions on retirement benefits would raise at least $600 million more than legislative analysts are expecting, based on the most recent state tax expenditure report.

What are the proposed tax brackets for joint filers under Amendment 87?

The measure would not create separate tax brackets for single and joint filers, so the brackets would be the same for individuals and married couples.

As a result, under Amendment 87, some dual-income households could face higher state taxes if they file jointly rather than individually.

That is a key difference from the federal income tax code, as well as many other states with progressive tax codes, which allow couples to make more money than individuals within the same bracket. The idea is to avoid bumping a couple into a higher tax bracket when they combine their income. But in graduated income tax systems there’s no way to eliminate marriage penalties — or marriage bonuses — entirely.

(Currently Colorado charges the same flat tax rate for everyone — 4.4% — so there is no reason to have separate brackets for individual and joint filers.)

Will the tax brackets under Amendment 87 adjust for inflation over time?

No. As a result, the share of households paying higher taxes under Amendment 87 would increase over time. The value of the measure’s tax cuts would also shrink over the years, if the legislature doesn’t make adjustments.

As an example, a household making $450,000 a year in today’s dollars would be moved into a higher tax bracket within eight years if their earnings increased by 3% annually.

However, it would take several decades for most taxpayers to reach the $500,000 threshold where the higher tax brackets kick in. Someone making a $100,000 salary today would not move into the higher bracket for more than 50 years at 3% annual inflation.