Colorado Voters Approve Graduated Income Tax Raising Top Rate to 8.4%

What voters did

Colorado voters opted to move from a single flat rate to a tiered income tax. The top marginal rate is set at 8.4% on dollars earned above $1 million, with higher rates beginning for households with taxable income over $500,000. The new structure will replace the current 4.4% flat income tax and applies to both individuals and corporations.

Backers described it as the first major revamp of the state's tax setup in nearly 40 years. They said they had won on Thursday, and the AP made its call on Friday after more than 51% voted yes.

Why supporters say it matters

As president of the Bell Policy Center, Chris deGruy Kennedy said, "This vote kicks off a multi-year effort to thoughtfully invest in programs that support Colorado workers, families, children and older adults," and added that Coloradans "voted for a tax system that asks those with the most to contribute their fair share." Supporters also emphasized that the levy is marginal - affecting only the next dollar earned - and asserted that, under the proposal, 97% of taxpayers will see lower bills.

Officials expect the change to raise about $2 billion a year once fully in place, with the new money directed to education, healthcare and childcare.

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The backdrop and the pushback

Most U.S. states already use graduated income taxes, but the pivot is notable in Colorado, where a relatively low flat rate has been part of the draw for high earners moving to Denver and Boulder. Since the pandemic, Aspen has gained even more visibility as a year-round haven for ultra-wealthy residents.

What this could mean for your portfolio

For investors tied to Colorado, once fully implemented, the move away from a single low rate is projected to generate roughly $2 billion annually, with the revenue going to education, healthcare and childcare.

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