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Colo. Voters Approve Cut To State's Flat Income Tax

By Daniel Tay · November 4, 2020, 1:09 AM EST

Colorado voters approved lowering the state's flat income tax rate Tuesday, which is expected to reduce state general fund revenue by $158 million in fiscal year 2021.

Voters approved Proposition 116, meaning Colorado's individual and corporate state income tax rates will be lowered from 4.63% to 4.55%. A prediction that the measure will reduce state general fund revenue by $158 million in 2021 is according to an April impact statement by the state Legislative Council Staff.

As of late Tuesday, the question was approved 57% to 43% with 87% of the votes reported.

The measure was brought by the Independence Institute, a conservative research group that submitted almost 199,000 signatures to Colorado Secretary of State Jena Griswold's office in July; 124,632 signatures were required for a measure to qualify for the November ballot.

The measure was also supported by the Charles Koch-funded Americans for Prosperity. Jesse Mallory, the state director of Americans for Prosperity, said in May that Colorado voters should have a choice between keeping their money or giving it to the government.

Jon Caldara, president of the institute, previously told Law360 that the proposed tax cut was important because it would maintain Colorado's competitiveness with other states.

A competing ballot measure to Proposition 116, Initiative 271, did not make it to the November ballot. Initiative 271 would have asked voters to approve a graduated tax, with a top rate of 8.9% on state taxable income of more than $1 million. According to the ballot title for the initiative, the measure would have raised $2 billion in revenue.

The state Department of Revenue reported in 2018 that more than 95% of taxpayers in the state would fall into the lowest tax bracket proposed by the initiative, 4.58% on income up to $250,000.

Carol Hedges, governance team member for Fair Tax Colorado, the supporters of Initiative 271, and executive director of the Colorado Fiscal Institute, previously criticized Proposition 116 as being inequitable because the amount of benefit that would accrue to the top 1% of wage earners in the state would be the same amount that would accrue to the bottom 70%.

"Particularly now, because of the effects of the [novel coronavirus] pandemic, we need better-funded schools, and we need resources to build the infrastructure of the public sector to buffer all of the impacts of the health epidemic," Hedges told Law360.

Caldara previously told Law360 that because all taxpayers would save the same percentage of their income tax, the proposal's effect was fair.

Colorado's revenue has been heavily affected by the pandemic. According to a September report by the state Legislative Council Staff, general fund revenue collections for fiscal year 2021 are projected to decline 11.6% from the previous year.

--Editing by Neil Cohen.

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