Legislative reviewers press back on drafting, timing as proponents seek Colorado graduated income tax

A review-and-comment hearing on Jan. 20, 2026, examined a package of related initiative petitions (Nos. 199–210) that would repeal Colorado's constitutional single-rate requirement and authorize a graduated state income tax on individuals, estates, trusts and corporations, create a Colorado's Future Account for revenue above a 2026 baseline, and require annual reporting and an audit.

Elizabeth Ramey, principal economist with the Legislative Council Staff, opened the meeting and read the memoranda prepared by legislative staff and the Office of Legislative Legal Services. The memoranda set out the proposals' principal purposes: amend the Colorado Constitution and Colorado Revised Statutes to (1) make legislative findings and declarations; (2) repeal the clause in Article X that specifies all taxable net income must be taxed at a single rate; (3) impose a graduated state income tax effective for taxable years commencing on or after Jan. 1, 2027; (4) apply a 4.4% tax to certain home-sale gains above federal exclusions; (5) extend the graduated structure to corporate net income in certain corporations; and (6) designate revenues above what would have been collected under the tax rates in effect Dec. 31, 2026 as "excess revenue," to be held in a Colorado's Future Account and spent for enumerated purposes.

The package designates different allocations of excess revenue across the individual filings: some versions prioritize kindergarten through 12th-grade public education, others include early childhood, postsecondary education, health care and child care; proponents said the variations reflect drafting choices but the same overall policy purpose.

Staff posed multiple substantive and technical questions. On the constitutionally required single-subject rule (Art. V, §1(5.5)), staff asked proponents to state the single subject for each initiative. Designated representatives said the single subject is the creation of a graduated income tax structure and related changes (repeal of the single-rate text, designation of any increased revenue as a voter-approved revenue change, dedicated uses for excess revenue, and an audited public report).

Staff also flagged the initiatives' omission of an explicit effective date in the proposed text. "When a majority of voters approve an initiative, the initiative is effective on and after the date of the official declaration of the vote and proclamation of the governor," Ramey noted as the constitutional default; proponents said the default effective date "is fine." Ramey and legal staff urged that if proponents want a date other than the default they should include it in the proposal.

A recurring line of questioning focused on the TABOR (Article X, §20) language used in the different filings. Staff asked how the proposed TABOR amendment language differs from related filings that were submitted at other times. Proponents acknowledged the filings are worded differently but said the differences are drafting alternatives intended to achieve the same result—allowing a graduated income tax—while providing options that the title board and reviewers might find acceptable.

Staff clarified timing for implementation: the draft statutory provisions specify that graduated brackets apply "with respect to taxable years commencing on or after Jan. 1, 2027." Staff and proponents agreed that means the new brackets would not apply to the 2026 tax year (taxes paid in 2027), with the graduated system applying beginning for tax years that start in 2027 (taxes paid in 2028).

Staff also raised a drafting issue on the statutes that create the Colorado's Future Account. The draft uses a date phrase referring to a fiscal year "commencing on or after 01/01/2026," but Colorado state fiscal years begin on July 1. Proponents said the intent is for the first audit and accounting to cover fiscal year 2026–27 (the year that begins July 1, 2026) and agreed to review the drafting to ensure the statute references the correct fiscal-year start.

Several questions centered on the definition and timing of "excess revenue." The memoranda tie excess revenue to what would have been generated by applying the tax rate that existed as of Dec. 31, 2026, but staff asked whether every use of the word "revenue" in the proposed statutory language is intended to refer only to income-tax revenue (as opposed to other state revenues), how and when excess revenue is determined (known vs. forecasted), and how the timing of that determination would interact with the General Assembly's appropriation or transfer authority. Proponents said they would consider clarifying language to specify income-tax revenue and to address timing and forecasting issues but did not offer a definitive on-record drafting change.

Staff pressed how the measures would ensure that money spent from the Colorado's Future Account would "supplement and not supplant" existing appropriations for education, health care and child care. Proponents reiterated the intent that the measures create new funding rather than replace existing appropriations and said they would consider clarifying statutory standards or definitions to implement that intent.

Across three memoranda reviewed at the hearing (Nos. 199–202; 203–206; 207–210), staff recorded both substantive questions and technical comments. Proponents and counsel acknowledged the concerns and said they would review and consider technical revisions and clarifying language. No formal amendments or votes occurred at the hearing; the session concluded after proponents declined further on-the-record remarks.

What happens next: Legislative Council staff recorded substantive and technical comments in the memoranda and invited the designated representatives to revise the proposed texts to address drafting issues; proponents said they would consider the comments and may amend language to clarify effective dates, fiscal-year references, definitions of revenue, and the TABOR language.