Why Ditching the Flat Tax Would Be Colorado’s Biggest Mistake

By Jake Fogleman | Commentary, Complete Colorado

The battle over Colorado’s future tax system has officially begun, and the stakes for families, businesses, and the state’s economy couldn’t be higher.

Backed by a coalition of advocacy groups that consistently push for higher taxes as the solution to Colorado’s challenges, the Bell Policy Center submitted proposed language for the 2026 ballot that would overturn nearly four decades of sensible tax policy by abandoning Colorado’s flat-rate income tax and adopting a graduated tax system.

Under their proposals, Colorado taxpayers would be forced to confront a new five-bracket tax system with marginal rates up to 9.5 percent, among the highest in the country. The proponents claim it’s about fairness, equity, and making the rich “pay their fair share” while providing more money for schools, healthcare, and other public services.

But behind these carefully crafted talking points lies a dangerous reality. This proposal risks destabilizing Colorado’s economy at a precarious moment, undermining the state’s competitive advantages, and fatally damaging the taxpayer protections that have kept Colorado fiscally disciplined for decades.

In short, what they propose is not a progressive reform, but a regressive backslide.

Colorado’s flat tax revolution

In 1987, the legislature voted to make Colorado the first state to transition from a graduated tax system to one that relies on a flat income tax rate applied evenly across all income levels.

Today, thanks to multiple ballot measures brought forward by Independence Institute, Colorado’s free market think tank, and overwhelmingly approved by the voters, that rate stands at just 4.4 percent, one of the lowest in the nation. Colorado’s relatively low flat tax has, in turn, helped make the state an attractive destination for established businesses, entrepreneurs, and skilled workers from across the country.

That’s because the flat tax system has several key advantages. Setting a single uniform rate makes tax filing simpler and more predictable for everyone, from individuals and families to mom-and-pop businesses and major corporations. It avoids the confusion of brackets, reduces disincentives to work harder or earn more, and eliminates concerns about inflationary bracket creep.

With one rate for everyone, taxpayers and state officials alike can forecast revenues and obligations with greater efficiency and clarity.

Finally, ensuring that tax policy changes affect all taxpayers equally prevents schemes to impose concentrated costs on small groups of residents.  Thus, the flat tax acts as a powerful political disincentive against policymakers making routine requests for higher taxes.

Other states have recognized these upsides. Since 1987, eleven states have gradually followed Colorado’s lead in transitioning to a flat tax system—including eight in the last four years alone—in a phenomenon that’s come to be referred to as the state flat tax revolution. Notably, no state that has transitioned to a flat tax has ever reversed course.

Only two states, Connecticut and Massachusetts, have ever switched from an original flat tax system to one in which different income levels are taxed at different rates. Each now finds itself in the bottom ten states for tax competitiveness, trailing behind every single flat tax state, according to the non-partisan Tax Foundation.

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