Colorado Senate Bill Expected to Increase Income Tax Revenue by $35.6 Million

The Colorado Senate convened on August 24, 2025, for the third day of its extraordinary session, focusing on a significant tax policy change. The proposed bill aims to decouple Colorado's tax regulations from federal guidelines, a move already adopted by 26 other states. Advocates of the bill argue that this change is a common-sense adjustment that could benefit the state's revenue system.

Senator Pelton, who spoke in favor of the bill, expressed surprise that Colorado had not implemented such a policy sooner. He encouraged his colleagues to support the legislation, highlighting its potential positive impact on state finances. According to estimates presented during the meeting, the bill is projected to increase income tax revenue significantly, with expected gains of $35.6 million in fiscal year 2025-2026, followed by $72.2 million in 2026-2027, and $73 million in 2027-2028.

The discussion also included light-hearted moments, with Senator Pelton referencing the word "Liechtenstein," which he humorously noted had been mentioned frequently in previous discussions. Despite the levity, the focus remained on the serious implications of the proposed tax policy change.

As the session progresses, the Senate will continue to deliberate on this bill, which could reshape Colorado's tax landscape and enhance state revenue in the coming years. The outcome of this legislation will be closely watched by both lawmakers and residents, as it may set a precedent for future tax policies in the state.