The state’s Title Board on Wednesday gave the go-ahead to a ballot measure for 2026 that could change Colorado’s income tax from a flat tax of 4.41% to a graduated income tax, beginning in 2027.

The title board’s unanimous approval of ballot measure #181 comes after the first attempt by a coalition led by the Bell Policy Center was rejected for single-subject violations.

Initiative #181 would change the state’s flat income tax rate, in which everyone currently pays the same rate of 4.41% to a graduated income tax, where people with incomes of up to $500,000 would get a small tax cut, and those who earn more would see an increase.

The proposal contains a dozen tax brackets, with the highest levels set to accrue up to hundreds of thousands of dollars in additional liabilities, while cutting them for individuals at the lower end of the proposed spectrum.

How it would affect individuals depends on their annual household or business income.

At the lower end, people could see their taxes cut by a few hundred dollars. At the highest end, $10 million or above, individuals and businesses could pay hundreds of thousands more each year.

The title board is a three-person panel that includes a representative from the attorney general’s office, another from the secretary of state’s office, and the head of the General Assembly’s Office of Legislative Legal Services or the latter’s designee.

Its primary role is to determine whether a ballot measure meets the state’s single-subject requirement and whether the final ballot language does what it says it does.

In October, the title board unanimously rejected two out of three submitted proposals from the Protect Colorado’s Future coalition, a dozen organizations that include the Bell, Colorado Children’s Campaign, Colorado Fiscal Institute, the Colorado Center on Law and Policy, and the Colorado Cross-Disability Coalition.

The title board’s problem? One line in the ballot measure that the title board said violated the state’s single-subject rule. That’s a constitutional amendment that says a ballot measure can only have one subject.

The offending line: TABOR, also known as Article 20 in the state constitution, says, “Any income tax law change after July 1, 1992, shall also require all taxable net income to be taxed at one rate, excluding refund tax credits or voter-approved tax credits, with no added tax or surcharge.”

The original proposals would have removed that entire sentence, and that was a no-go with the title board, mainly due to the surcharge.

The coalition went back to the drawing board. It came up with ballot language that now says, “Any income tax law change after July 1, 1992, shall also require all taxable net income to be taxed at one rate, excluding refund tax credits or voter-approved tax credits, with no added tax or surcharge.”

The ballot measure also added the requirement of an audit report showing how the excess revenue would be spent. The ballot measure directs those dollars to public education, including increasing teacher pay, replacing lost Medicaid funding from the federal government, and for childcare and workforce development.

Initially, Legislative Council staff estimated that revenue at around $2.3 billion per year.

But a fiscal analysis by the Legislative Council staff released Tuesday now pegs that estimate at a maximum of $4.1 billion per year.

The analysis said the revenue estimate does not account for the impacts of recent federal legislation due to insufficient data. But the bigger issue, the study indicated, is based on revenue forecasts.

The initial estimate of $2.3 billion represents the revenue impact of #181 under the current (September 2025) revenue forecast from Legislative Council economists. “Based on forecast error that could occur,” the analysis said, the maximum dollar amount could be as much as $4.1 billion.

During the 2025 session, lawmakers, on party-line votes, approved a bill requiring changes to the ballot initiative process. That included requiring proponents to submit a chart outlining the differences when they submit multiple ballot measures on the same issue, as well as requiring the Legislative Council staff to provide a maximum estimate on the revenue generated by a ballot initiative that increases taxes. 

Chris deGruy Kennedy, president of the Bell, told Colorado Politics the vote was what he expected. “The issue brought up in the previous hearing was addressed, so the single-subject ruling was what we expected.”

As to the change in the estimate, which deGruy Kennedy called a “wild swing on the numbers,” he said they’re evaluating those numbers.

DeGruy Kennedy said much of the change in the estimate is tied to fluctuations in corporate income tax. 

From a policy perspective, he explained, “I can argue the state needs more” than $4.1 billion.

He cited a K-12 adequacy study produced a year ago by the state Department of Education that found a $ 4,600-per-student gap between the funding needed to provide an adequate education and existing levels of spending from state and local sources.

The bottom line in that study is that the state is short $4.1 billion in its K-12 funding, the study said.

On top of that, deGruy Kennedy said, there are looming Medicaid cuts and changes in federal funding that will shift more of those costs onto the state.

Medicaid is now the largest item in the state budget, accounting for 36% of the state’s general fund revenue. The budget proposal for 2026-27 submitted by Gov. Jared Polis in November would cover only about half of the cost increases estimated by the Department of Health Care Policy and Financing. 

Federal changes could add $1 billion to $2 billion per year to Colorado’s share of Medicaid costs. The Congressional Budget Office, as reported by KFF, estimated that the One Big Beautiful Bill would result in a $12 billion decrease in federal funding for Colorado Medicaid over the next decade.

DeGruy Kennedy said those two items mean the state has a much larger budget gap ahead.

The other issue, however, is a political one, he said: given a higher estimate of what voters will be comfortable with.

What’s next for #181: appeals by opponents of the measure, which includes Advance Colorado. The appeal(s) will be heard by the title board on Dec. 17.

And this may not be the final version of what the coalition wants to move forward on, deGruy Kennedy indicated. “It’s very possible this is the one we move forward,” he said, “but that depends on additional initiative filings from our coalition.”

There was some tweaking of the title by the title board on Wednesday, but the “title board bent over backwards to ensure there wasn’t biased language in the title and voters get an objective description of the single subject and what the measure is intended to do,” deGruy Kennedy said.

Opponents at the hearing Wednesday said the ballot measure still violates the single subject rule, and that voters might be confused by the measure, choosing to support certain funding areas and not others.