A state panel on Wednesday gave the go-ahead to a ballot measure that seeks to change Colorado’s flat rate of 4.41% to a graduated income tax, beginning in 2027, and raise billions dollars in new revenue.

Now the proponents of the measure – which would appear on the 2026 ballot, assuming they gather sufficient signatures – must decide whether to push through with the approved version or tweak it.

The reason this measure might give them pause deals with its new price tag. A revised estimate puts the total tax increase at $4.1 billion, nearly twice as expensive as the original calculation of $2.3 billion.

One of the measure’s organizers acknowledged that, with that amount, it becomes a “political” question. That is, voters might balk at billions more in tax increase.

The Colorado Title Board’s unanimous approval of ballot measure No. 181 comes after it rejected the first attempt by a coalition, led by the Bell Policy Center, over single-subject violations.

Initiative No. 181 would change the state’s flat income tax, 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, while 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 – individuals and businesses earning $10 million or above – 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 Policy Center, Colorado Children’s Campaign, Colorado Fiscal Institute, the Colorado Center on Law and Policy, and the Colorado Cross-Disability Coalition.

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

Here’s the issue. The Taxpayer’s Bill of Rights, 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. That was a no-go with the Title Board – mainly due to the issue of surcharge.

The coalition went back to the drawing board, deleted a clause and came up with this change: “Any income tax law change after July 1, 1992, shall also require no added tax or surcharge.”

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

Notably, the Legislative Council staff initially estimated that revenue from the tax changes at around $2.3 billion per year.

But a fiscal analysis by the Legislative Council staff released on Tuesday now pegs that figure 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 analysis indicated, deals with revenue forecasts.

The initial estimate of $2.3 billion represented the revenue impact of No. 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 reach as much as $4.1 billion.

During the 2025 session, lawmakers, on party-line votes, had 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 mandating 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,” he said.

As for the change in the estimate, which deGruy Kennedy called a “wild swing on the numbers,” he said the proponents are evaluating it.

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

From a policy perspective, he said, “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.

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 congressional budget adopted in July 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 acknowledged – given the higher tax estimate and what voters might be comfortable with.

What’s next for No. 181 is appeals by opponents of the measure, which includes Advance Colorado. Those appeals, if any, 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 measure’s title 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.