Progressive tax proposal targets Colorado employers while 3.5% already pay most corporate taxes

By Cory Gaines | Commentary, Colorado Accountability Project

The progressive tax scheme and Colorado Business

Your 2026 ballot may have a proposal on it to change Colorado’s current flat tax to graduated (aka progressive) income tax rate. That means when you earn more, you pay a higher percentage of tax.

The actual ballot proposal is linked first below. I am not aware of it hitting the Secretary of State’s tracker page yet, but I know it’s on the legislature’s and that is what the link is for.

This would, quoting the press release pushed by the groups supporting this measure (linked second below), “… lower taxes for 98 percent of Coloradans, while raising taxes on individuals and corporations making more than $500,000 a year.”

At a later point, that same press release says the following (quoted with link intact):

“The graduated income tax proposal will help recapture some of the $71,000 the wealthiest Coloradans will receive in 2026 from Trump’s tax cuts, reinvesting those dollars back into classrooms, healthcare, childcare, and other state priorities that could include food security, public safety, or workforce development programs.”

While the focus in much of the coverage on this measure has been on individuals (and we’ll get to why I think that is in a second), little attention has been paid to the effect this measure would have on business.

I was curious to get a summary look at business in Colorado and how many of them would be in this new tax scheme.

Before we look at those numbers, the below is a summary of the changes that would occur in the corporate tax structure if this measure passed. The numbers were taken from the ballot measure itself.

— For corporate incomes $0 – $100K per year, the tax rate is 4.21%

— For corporate incomes $100K – $500K, the rate is 4.21% on amounts up to $100K and then 4.41% for > $100K to $500K.

— For corporate incomes $500K – $750K, the rate is as previous up to $500K, for income above $500K but less than $750K the rate is 7.51%

— For corporate incomes $750 – $1M, the rate is as previous up to $750K, for income above $750K but less than $1M the rate is 8.51%

— For corporate incomes above $1M, the rate is as previous up to $1M, but for income above $1M the rate is 9.51%

It’s clear why this tax plan is labeled as graduated or progressive. Clearly as a corporation earns more, they will pay a higher (much higher in some cases) tax rate.

I next wanted to look at how many businesses would be effected by this change, in other words, how many corporations fit in each of these income brackets?

I went to the Department of Revenue which gave me what you see in the third link below. It’s a tax breakdown from 2022 (the latest year they would share), showing how many corporations that paid taxes here fall into various income brackets.

Note that the way they parse their data is different from the way the ballot measure would, so the categories from the Department of Revenue don’t exactly line up with the above.

I used the spreadsheet to give some summary numbers and took a screenshot of the results. That is attached as screenshot 1.

As an example, the number of corporations earning $1M or above in 2022 was 2234. That’s 3.5% of all corporations including the 26295 that had negative earnings in 2022. The number earning $0 to $100K was 30929 or 48%.

Next, I went to look at Colorado Gross Tax receipts broken down by that same group. Those results are attached as screenshot 2.

You see a pattern which is the reverse of the first table, and quite a reversal at that! Businesses earning from $0 to $100K pay about 1% of all state income taxes while those earning $1M and up pay 94% of the total gross tax revenue.

Let’s pause at that. The group that comprises 3.5% of all corporations is paying 94% of our taxes. Is this what proponents of the initiative mean in their flyer when they say our current tax structure is “inequitable”? When they say the wealthy don’t pay their fair share?

Thus the problem with blindly following the words and sloganeering of advocates. It’s tempting to vote for things like this because you might end up with a tax break and others (who presumably will have an easier time) will pay the bills (see, for example, other taxes like the “free” lunch tax on the wealthy, or the UPK tax on smokers).

This is why so much of the advocacy has been geared toward individual taxpayers and not talked much about corporations. They want you to follow that impulse without thinking. You should, however, stop and reason this through. Our economy is akin to a an ecosystem. Other people’s success may not end up directly benefiting me, but we are connected to each other.

If a business has to pay more to do business, we pay more in higher prices.

If a business suffers, they don’t hire people and/or take other steps to cut costs such as reducing hours or laying off staff.

If a business doesn’t expand because there is (as is the case with this measure) a stiff penalty against going up an income bracket, our economy stagnates.

And when the tax base shrinks because some of the businesses leave this state we either have to cut funding or the rest of us have to pay more. Anyone care to lay a bet that, if this measure passes, they’ll stop there and not be back for more taxes from lower incomes later?

We can fund the necessary functions of government without this progressive tax scheme. When the sponsors talk about reinvesting “…dollars back into classrooms, healthcare, childcare, and other state priorities that could include food security, public safety, or workforce development programs” they leave out that we have the capacity to do these things right now. We just can’t do them while doing all the other nifty things Colorado Democrats have been spending on the last four years.

This measure is unnecessary and will bring harm to us all. Vote no.

https://leg.colorado.gov/content/graduated-income-tax

https://coparentcoalition.salsalabs.org/protectcoloradosfuture?wvpId=98a8269a-b83a-4daa-bea8-d4a7bf24d652

https://docs.google.com/spreadsheets/d/1lHXsFbQhkQlkyPuDqZQR3kCLTQC7CWYF/edit?usp=sharing&ouid=113451218632854191614&rtpof=true&sd=true

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Polis: if local decision makers don’t do what we want, let’s override that.

The Sun article linked at bottom is another shot fired in the fight between Xcel Energy and Elbert/El Paso counties over the route that Xcel has mapped out for their Power Pathway.

The latest is that Xcel has filed with the PUC to use an old (and, per the article, “little-used”) statute that lets a utility go to the PUC to override local land use decisions.

Xcel Energy is asking 3 of Polis’ political cronies (two with ties or homes in Boulder and one from up near Vail in Edwards) to step in and approve their power line routes over the objections of the people who will have to live near the actual power lines and see them everyday.

READ THE FULL COMMENTARY AT THE COLORADO ACCOUNTABILITY PROJECT

Editor’s note: Opinions expressed in commentary pieces are those of the author and do not necessarily reflect the opinions of the management of the Rocky Mountain Voice, but even so we support the constitutional right of the author to express those opinions.