Ballot Initiative #271 — Fair Tax Colorado 

Initiative #271, also known as Fair Tax Colorado, is a proposed citizen's ballot initiative that would:

  • Repeal the constitutional requirement that all taxable net income be taxed at one rate.
  • Create a tiered tax structure where:
    • 100% of Coloradans receive a tax cut on the first $250,000 in taxable income as it lowers the current 4.63 percent tax to 4.58 percent. 
    • 50% of revenue raised is dedicated to pre-primary through twelfth grade education.
    • Taxpayers across all income levels will pay a more equal portion of their income in state and local taxes.
  • Establish a 25-member Fair Tax Commission, to include representatives of state government, local government, tax practitioners, business owners, and the public. The Commission is required to report on the effects of the state income tax rate structure on revenue, the income distribution, and the state business climate, and to recommend modifications to the structure.

The CASB Board voted at its March 20, 2020 Board of Directors meeting to support Initiative #271 by creating factual summaries and resources for our members. Resources will be made available in the near future and as the economic forecast is updated to reflect the impacts of the COVID-19 pandemic on our state budget and Colorado school funding.


CASB Resources

 
Sample Resolution in Support of Fair Tax Colorado Ballot Initiative (pdf)
Sample Resolution in Support of Fair Tax Colorado Ballot Initiative (doc)
2020 Fair Campaign Practices Act Dos and Don'ts
2020 Fair Campaign Practices Act Memo

Other links and resources

CASB Conversations: Initiative #271 — Fair Tax ColoradoInitiative
Podcast explaining Initiative #271 — Fair Tax Colorado
Link to Ballot Title 
Link to Ballot Language 
Link to Fiscal Impact Statement
FTC Tax Calculator (Colorado School Finance Project)
Link to Fair Tax Colorado Website

 


FAQ

What does the polling show?

How much will be raised and how will the money be spent?

What is the timeline for this effort?

How is this measure different than Amendment 73?

In addition to funding education, what other public investments can be addressed?

How will the $2 billion in revenue be raised?

Who pays less?

How will we know if the change results in a more fair tax system that is meeting the growing population and changing economy of Colorado?

How do we know that current education funding won’t be reduced because new money is coming in (money will not be used to supplant current education funding)?

How will the money be distributed to education?


What does the polling show?

Keating polling memo (May 2020)

How much will be raised and how will the money be spent?

According to the most current estimate provided by Legislative Council Staff in the Fiscal Impact Statement, Initiative #271 will raise $2 billion.* Revenue collected from the increased individual income tax is exempt from the state TABOR limit as a voter-approved revenue change. Revenue is required to be appropriated and spent as follows:

  • 50 percent to supplement current funding for pre-primary through twelfth grade education; and
  • 50 percent to address the impacts of a growing population and a changing economy, of which no more than 10 percent may be expended for administrative costs.
Funds are required to be appropriated and spent through current funding distributions.
*Given that the recent developments with COVID-19 is likely to result in lower revenues if a recession takes hold, Colorado could face a budget slide if/when the amount of revenue lost exceeds the tax revenue coming in. The education community may be faced with using existing revenue to keep schools open rather than to supplement current funding for pre-primary through twelfth grade education. In this extreme and extraordinary case, having this additional revenue will allow the state to recover quicker and take advantage of a growing economy. This is not possible currently and is why there is a decade plus debt to K-12 of half a billion dollars.


What is the timeline for this effort?

  • Petitions became available the week of March 10, 2020.
  • Approximately 125,000 signatures are required to be collected in total. 
    • Due to Amendment 71 changes, a minimum of 2% of registered voters must sign petitions in each of the state’s 35 Senate Districts.
  • Signatures are due to the Secretary of State by August 3, 2020.
  • If it meets the signature requirement, the amendment will be placed on the November 2020 ballot.

How is this measure different than Amendment 73?

  Amendment 73 Initiative #271
Change tax structure Yes  Yes
Change to flat income tax Yes Yes
Change to Gallagher (property tax rates) Yes No 
Change to corporate income tax Yes No
Projected revenue $1.6 billion $2 billion (impact statement was created prior to COVID-19 impacts)
Revenue earmarked Yes, education only Raises money for both education and other state priorities (education receives 50%)
Vote threshold required to pass  55% + 1  50% + 1

 

In addition to funding education, what other public investments can be addressed?

Public investments are those things and services that we collectively use and pay for that make our communities strong such as, schools, libraries, bike trails, transportation, and mental health services. The revenue raised through Initiative #271 is available to support all of these public investments.

How will revenue be raised?

The measure repeals the constitutional requirement that all taxable net income be taxed at one rate. Beginning in tax year 2021, the measure replaces the current 4.63 percent tax on income earned by individuals and fiduciaries with an income tax system, whereby Colorado taxable income earned above certain thresholds is taxed at higher rates. For tax year 2021, the rates in the measure are:
  • for taxable income up to $250,000, 4.58 percent;
  • for taxable income from $250,000 up to $500,000, 7.00 percent;
  • for taxable income from $500,000 up to $1,000,000, 7.75 percent; and
  • for taxable income from $1,000,000 and up, 8.90 percent.
For example, a taxpayer with taxable income equal to $550,000 would be taxed at 4.58% for the first $250,000 in taxable income. The subsequent $250,000 would be taxed at a rate of 7%, and the final $50,000 would be taxed at a rate of 7.75%
 

Who pays less?

All Coloradans will see a lower income tax rate on taxable income up to $250,000. For 95% of Coloradans, who have taxable income below $250,000, they will pay less in taxes. For Coloradans with taxable income above $250,000, they will see incremental increases.

How will we know if the change results in a more fair tax system that is meeting the growing population and changing economy of Colorado?

Initiative #271 creates a Fair Tax Commission that will consist of 25 appointed members who are responsible for reporting to the Governor, the General Assembly, and the public the effects of the rate structure of the state income tax system. In particular, the Commission is asked to report on:
  • The state revenue and funding for public services provided by the state
  • The distribution of income among taxpayers
  • The business climate, the ability of the state to attract and retain business.
The Commission’s report shall include recommendations for modifications to the rate structure of the state income tax system.

 

How do we know that current education funding won’t be reduced because new money is coming in (money will not be used to supplant current education funding)?

The ballot measure language states the following:
“The fifty percent shall be used to supplement and not supplant General Fund and State Education Fund appropriations for Total Program Funding and Categorical Programs existing on the effective date of this section.”

 

How will the money be distributed to education?

The ballot measure language states the following:
“At least fifty percent of such revenue shall be appropriated and expended for pre-primary-12 education to recruit, retain, and pay teachers and student service providers, pursuant to the Public School Finance Act of 1994, Article 54 of Title 22, Colorado Revised Statutes, and for Categorical Programs, as defined in Section 17(2) of Article 9 of the Constitution of the State of Colorado, or their successor provisions.”