Colorado Graduated Income Tax: Initiatives 195 & 232
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The short answer: On November 3, 2026, Colorado voters will decide whether to adopt a Colorado graduated income tax. It would replace the flat 4.4% rate with six brackets from 3.7% to 8.4%, raising taxes on income above roughly $511,000 and trimming them slightly below that.
- Initiative 195 would tax income above $500,000 at 7.4%, above $750,000 at 7.9%, and above $1 million at 8.4%, starting with tax years beginning January 1, 2027.
- Initiative 232 would cap Colorado’s individual and corporate income tax rates at 4.4%.
- If both pass, the measure with more “yes” votes controls where they conflict. The courts may have to settle the rest.
- Legislative staff estimate Initiative 195 would raise about $2 billion in the 2027–28 fiscal year.
Colorado’s November ballot includes two income tax measures that point in opposite directions. Initiative 195 would create a Colorado graduated income tax, while Initiative 232 would hold the top rate at today’s 4.4%. This summary, current as of September 2026, covers the proposed brackets, who would pay more or less, and the planning questions worth raising now.
WhippleWood does not take a position on either measure. Our goal is to help you understand what each one would do to your tax bill, so you can plan with confidence whatever the outcome.
How Would the Colorado Graduated Income Tax Work?
Initiative 195 would remove the Colorado Constitution’s single-rate requirement and tax Colorado taxable income in six brackets, starting with tax years that begin on or after January 1, 2027. Income up to $100,000 would be taxed below today’s 4.4%. Income from $100,001 to $500,000 would stay at 4.4%, and income above $500,000 would face rates from 7.4% to 8.4%.
| Slice of Colorado taxable income | Current rate | Proposed rate under Initiative 195 |
|---|---|---|
| Up to $25,000 | 4.4% | 3.7% |
| $25,001 to $100,000 | 4.4% | 4.2% |
| $100,001 to $500,000 | 4.4% | 4.4% |
| $500,001 to $750,000 | 4.4% | 7.4% |
| $750,001 to $1,000,000 | 4.4% | 7.9% |
| Over $1,000,000 | 4.4% | 8.4% |
Brackets as reported by The Colorado Sun. Confirm filing-status details against the final measure text.
Does Initiative 195 Need 55% of the Vote?
No. The state Title Board found that the measure only repeals part of a constitutional provision, so it needs a simple majority rather than the 55% most constitutional amendments require.
Backers qualified the measure with 130,938 valid signatures against the 124,238 required, according to the Colorado Secretary of State’s office as reported by Colorado Newsline. The measure text and fiscal summary are posted on the Colorado General Assembly’s Initiative 195 page.
Who Would Pay More, and Who Would Pay Less?
Because each rate applies only to its own slice of income, most taxpayers would see a small cut. The increase starts only once Colorado taxable income passes about $511,000. Below that point, the lower rates on the first $100,000 outweigh the unchanged middle bracket. Above it, the 7.4% rate on income over $500,000 overtakes those savings.
| Colorado taxable income | Tax at today’s 4.4% | Tax under Initiative 195 | Change | Effective rate |
|---|---|---|---|---|
| $50,000 | $2,200 | $1,975 | $225 less | 3.95% |
| $95,000 | $4,180 | $3,865 | $315 less | 4.07% |
| $300,000 | $13,200 | $12,875 | $325 less | 4.29% |
| $600,000 | $26,400 | $29,075 | $2,675 more | 4.85% |
| $1,200,000 | $52,800 | $76,725 | $23,925 more | 6.39% |
Illustrative figures on Colorado taxable income before credits, assuming the brackets apply as reported.
These results match the Colorado Sun’s analysis. It found that a household near the state median income of about $95,000 would pay an effective rate of 4.07%, while a family earning $1.2 million would pay about $24,000 more. Reporting on the measure describes the increase as falling on roughly the top 3% of earners, with the other 97% seeing a slight reduction.
What Is Initiative 232, and How Does It Interact With Initiative 195?
Initiative 232 is a proposed state statute, backed by the group Advance Colorado, that would cap Colorado’s individual and corporate income tax rates at 4.4%. Because the current flat rate is already 4.4%, it would not lower anyone’s tax. It would set a ceiling that a graduated rate could not exceed.
The two measures conflict, and Colorado law settles conflicts between voter-approved measures by vote count.
“In case of adoption of conflicting provisions, the one that receives the greatest number of affirmative votes prevails in all particulars as to which there is a conflict.” Colorado Revised Statutes, Section 1-40-123
Where the measures do not squarely conflict, parts of both could take effect. Ballotpedia notes that if Initiative 232 wins more votes, the 4.4% ceiling would hold, while the lower rates for smaller incomes might still apply. The Colorado Sun reports that the courts may have to decide how the two interact. Treat any “both pass” result as unsettled until then.
When Would the Changes Take Effect, and Where Would the Revenue Go?
If voters approve Initiative 195, its rates would apply to tax years beginning on or after January 1, 2027, so your 2026 return would not change. Nonpartisan legislative staff estimate the measure would raise about $1 billion in fiscal year 2026–27 and about $2 billion in 2027–28. Revenue would then grow with income and population.
The measure directs the new revenue to K-12 education, childcare, and healthcare programs. State withholding tables would likely change early in 2027, so higher earners may notice the difference in their paychecks before they file.
Would Initiative 195 Affect Business Owners?
Yes, for owners with high incomes. Reporting on the measure describes the higher rates as applying to income earned by people and corporations above $500,000. Owners of S corporations, partnerships, and LLCs generally report business income on their personal returns, so a strong year at the company can push an owner’s Colorado taxable income into the upper brackets.
That makes timing and structure worth a second look. Colorado’s elective pass-through entity tax lets eligible businesses pay state income tax at the entity level. That can change how a higher state rate interacts with the federal deduction for state and local taxes. Whether it helps depends on your ownership, your income mix, and the federal rules in effect for 2027.
What This Means for You
If your Colorado taxable income stays below about $500,000, the practical effect of either measure is modest: a few hundred dollars a year saved under Initiative 195, or no change under Initiative 232. If your income is well above $500,000 in some years, the outcome could change your 2027 tax bill by thousands or tens of thousands of dollars.
For higher earners, the planning questions center on timing. Income you can reasonably recognize in 2026, such as a planned bonus, a Roth conversion, or the sale of a business interest, would be taxed at 4.4% under current law. Deductions you control may be worth more in 2027 if rates rise. None of this calls for action before the vote, but it does call for having the numbers ready.
Next Steps
- Estimate your 2026 and 2027 Colorado taxable income, including expected business income, capital gains, and bonuses.
- Identify income you could reasonably shift between 2026 and 2027, such as an installment sale or a Roth conversion.
- If you own a pass-through business, review whether the elective pass-through entity tax still fits under each outcome.
- Revisit your plan once the November 3, 2026, results are certified, and adjust 2027 withholding or estimated payments if needed.
Contact Us
If you want to see how Initiative 195 or Initiative 232 would affect your own return, Mitch Clark, CPA, and our tax team can model both outcomes with you before year-end. Learn more about our individual tax planning and compliance and state and local tax services, read our summary of Colorado’s 2026 small business tax changes, or email us at info@whipplewood.com.
About the Author
Mitch Clark CPA
Mitch started his journey as an entrepreneur when he was a teenager in high school. “I owned a property management company. That’s where I got my first exposure to what it means to be a businessperson, like maintaining accounting files or paying taxes,” he explains. He sold his company when he entered college. Mitch’s distinct resolve, resourcefulness, and wisdom beyond his years was a unique and valuable resource for the organization that normally utilizes retired business owners as mentors.
