COLORADO — This  November, Colorado voters are going to be presented with a pair of conflicting ballot initiatives regarding our state income tax.

Currently, all Colorado taxpayers pay 4.4% of their Federal income tax as the state income tax. This figure has only been in place since 2022. Since 1987, when state tax was set at 5%, various initiatives have gradually lowered the rate at which we pay.

Before that, since 1937 Colorado had a graduated tax system, where residents with higher incomes paid a larger proportion of their income in taxes. Now the proponents of Initiative 195 are proposing to return us to that system.

(FYI: currently, 26 states have graduated income taxes, 15 states have a flat tax, and nine have no state income tax.)

According to the Common Sense Institute, “Initiative 232 was proposed as a direct response to Initiative 195, and the two measures would move Colorado’s income tax system in opposite directions.

“Initiative 195 would remove Colorado’s constitutional requirement for a flat income tax and allow the state to adopt a graduated income tax system with different rates for different income levels. Initiative 232 is a statutory measure that would set a maximum state income tax rate of 4.4%, prohibiting higher tax rates like those proposed under Initiative 195.”

Initiative 195 would designate the new revenue for K-12 education, health care, and early child care and education.

If either one of these initiatives passes while the other fails, the results would be clear. However, since these are separate measures, it is quite possible that both might pass, which quickly leads to confusion.

Again, from the Common Sense Institute: “If both initiatives pass, and 232 receives more votes, only the tax cuts from 195 are implemented, and tax rates remain capped at 4.4%.

“However, if both measures pass and 195 receives more votes, the progressive tax structure is implemented. This means the total number of yes votes, rather than the percentage of approval, determines which measure takes effect.”

In other words, if 232 receives more votes, not only will the tax rate be capped at 4.4%, but the tax cuts for low-income earners proposed in 195 will also be put in place, leading to a net decrease in taxes paid to the state.

Supporters of Initiative 232’s flat income tax rate believe that its strength lies in its simplicity, and that a graduated income tax would harm the state’s economy, even though it would only raise taxes for the 3% of individuals and 5% of corporations making more than $500,000 per year.

Proponents of Initiative 195’s graduated income tax argue that it is only fair that higher income earners should pay a higher percentage of their income in taxes. Supporting this approach, under Initiative 195, new revenue generated by the measure would be exempt from TABOR restrictions while it is projected to generate approximately $2.7 billion for a state that is under severe economic pressure.

There is a great deal of information available on the internet regarding these two initiatives, and there will likely be an advertising war arising soon to try to influence your decision on this matter. It’s better to be prepared with information before you head to the polls in November.