BACKGROUND
The Taxpayer’s Bill of Rights (TABOR) caps state spending, with the cap growing with population and the local Consumer Price Index — which has squeezed state spending. For a decade and a half, Colorado cut state support for public schools through what it called the Budget Stabilization Factor. The cost of Medicaid, the other large piece of General Fund spending, has grown faster than the TABOR cap. The state faced a $1.2 billion deficit in fiscal year 2025–26, and again in 2026–27.
Congress passed the tax bill H.R.1 (the 2025 budget reconciliation bill) in 2025. Because Colorado’s income tax calculations start with federal adjusted gross income, the extra federal tax breaks in H.R.1 tore a large hole in state revenue — making up more than half of the $1.2 billion gap in the 2026–27 budget. The rest came from inflation and caseload increases, especially in Medicaid. Balancing the state budget required cuts, including to Medicaid reimbursement rates and some services, to early intervention programs, and to the state’s reserve.
Colorado currently has a flat income tax — everyone pays the same rate on Colorado taxable income. Amendment 87 would change Colorado to a graduated income tax, like the federal system, increasing revenue the state could spend and easing the need for cuts to state programs.