Colorado Initiative 195: graduated income tax—what it could mean for Denver

Colorado voters will weigh Initiative 195 (Graduated Income Tax) in the 2026 election cycle. The measure would replace the state’s current flat income tax with a graduated, bracket-based system—lower rates for many taxpayers and higher rates for higher incomes—while directing qualifying “new revenue” to a dedicated fund with spending limits for education, health care, and child care.

For Denver-area residents, the practical question is less about campaign slogans and more about the official documents: how the initiative’s bracket rules work, and what Legislative Council Staff modeled for state revenue and average tax changes by income category.

Quick context: Colorado’s flat income tax vs. Initiative 195’s brackets

Colorado’s initiative text starts from the current system: a 4.4% flat income tax on federal taxable income for Colorado taxpayers, including individuals, estates, and trusts.

For tax years starting January 1, 2027, Initiative 195 would impose a graduated state income tax on federal taxable income using the following key rate points:

• 3.71% for federal taxable income up to $25,000.
• Rates step up across additional income bands.
• 8.41% for federal taxable income above $1,000,000.

What Initiative 195 would change (plain-English version)

In non-technical terms, Initiative 195 would:

• Replace one flat rate with multiple brackets and rates tied to federal taxable income (for individuals, estates, and trusts).
• Use a “cut vs. increase” narrative anchored around $500,000: the measure’s legislative declaration says it would cut taxes for individuals and small businesses making less than $500,000 per year while increasing taxes for those making more than that threshold.
• Create a dedicated path for “new revenue”: the initiative text says revenue above what would otherwise have been collected under current tax rates would be transferred into a fund called Colorado’s Future Fund, with spending limited to purposes including public education, health care, and early child care and education.
• Frame the spending as supplemental: the initiative text says new revenues are intended to supplement rather than supplant existing funding levels.

What the official numbers say: Legislative Council Staff fiscal summary

Legislative Council Staff’s fiscal summary estimates that replacing Colorado’s flat income tax with a graduated income tax would increase state General Fund revenue from income taxes by:

• $1.0 billion in FY 2026-27, and
• $2.0 billion in FY 2027-28.

The fiscal summary also flags that the FY 2026-27 estimate represents a half-year impact for tax year 2027, and it provides a maximum dollar change preliminarily estimated as an increase of $2.7 billion for FY 2027-28 (reflecting potential forecast error).

Who would pay more or less (modeled average changes by income category)

The fiscal summary includes a table showing the estimated change in state income taxes owed by income category. Those categories are based on adjusted gross income reported to the IRS, and the table reports average income tax owed changes under the proposal.

Examples from the official table (proposed change in average income tax owed):

• $25,000 or less: $59 to $50 (change -$9).
• $200,001 to $500,000: $9,344 to $9,019 (change -$325).
• $2,000,001 to $5,000,000: $41,196 to $55,110 (change +$13,914).

In the income categories shown in the table above $1,000,001, the modeled average changes are increases.

TABOR and accountability: what the initiative text says

Because Colorado’s Taxpayer Bill of Rights (TABOR) limits how revenue and tax changes can flow into spending and refunds, Initiative 195 includes specific language meant to address those concerns.

According to the initiative text and Legislative Council Staff’s fiscal summary, the proposal would:

• Not reduce or otherwise impact TABOR refunds, with the initiative text stating that revenue raised that exceeds the TABOR spending limit would be required to be refunded to taxpayers.
• Maintain voter-approval mechanics: the initiative text says it would not change the constitutional requirement that the state government can’t raise tax rates without another vote of the people.
• Require annual oversight: the initiative text calls for an annual report by the nonpartisan Office of Legislative Council and an annual audit by the Office of the State Auditor.

What Denver-area residents can do next: check the official ballot analysis and tables

If you want to connect the proposal to your household or business, the most direct path is to use the official Colorado General Assembly pages:

• Ballot analysis (Initiative 195) for the 2026 timeline: the ballot page lists a mailing date (actual) of 07/24/2026 for the second draft, with comments due 07/31/2026.
• Text of the measure to confirm the bracket structure and the effective timing starting with tax years on/after January 1, 2027.
• Legislative Council Staff’s Fiscal Summary to match your household’s adjusted gross income category to the modeled average income tax changes.

Bottom line: Initiative 195 would replace Colorado’s 4.4% flat income tax with graduated brackets beginning in 2027, and the official Legislative Council Staff fiscal summary provides modeled changes to average taxes by income category plus estimates of resulting General Fund revenue and how the proposal is framed under TABOR.

Sources

• CPR News (July 22, 2026): Colorado income-tax initiatives explainer and campaign framing
• Colorado General Assembly ballot page: Initiative 195 (Graduated Income Tax)

Look for updates to this story

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