Counting the Hidden Costs of Colorado’s Tax Code

TABOR might promise a government on a diet and fatter refund checks, but Colorado’s wallet feels the pinch. It’s one of the tightest tax laws in the country, quietly deciding what our state can and can’t afford. If this makes you scratch your head or mutter, “Wait, that’s fishy…” you’re in good company.

June 26, 2026

Did you know that since TABOR passed in 1992…

…wealthy individuals and big corporations have been getting hidden tax breaks year after year?

First, as we’ve covered in the Con before, TABOR requires that all income be taxed at a single rate with no added tax or surcharge. This means billionaires pay the same 4.4% tax rate on every dollar of taxable income, just like teachers and home health care workers.Because TABOR requires a flat income tax, many wealthy households receive a tax break worth tens of thousands of dollars annually compared to a graduated tax system. And every time Colorado has cut that rate, from 5% in the early TABOR years to 4.4% today, the biggest breaks have gone to the richest people without most taxpayers knowing.

Investment income gets a break, too.

And there’s more. Remember, TABOR also prohibits added taxes or surcharges on different kinds of income, like profits earned on the sale of stocks and bonds. Many wealthy people earn the bulk of their income from investments, not work.Some states, like Minnesota, and even the federal government place an added tax on passive income. The federal government has a net investment income tax for higher-income taxpayers, and Minnesota has a net investment income tax on investment income above $1 million.Colorado can’t do that because of TABOR.So, as wealthy people’s income from investments and capital gains outpaces the growth in wages every year, so does the value of the tax breaks our tax code hands them. TABOR’s requirement for a flat tax, with no added tax or surcharge on income, means our tax code helps widen income inequality and concentrate wealth, and power, in the hands of the wealthy.Federal tax breaks roll down to Colorado.

The flat tax rate isn’t the only way TABOR delivers hidden tax breaks to millionaires and profitable corporations.Like many states, Colorado’s tax base starts with what individuals and corporations declare as “taxable income” on their federal tax returns. Colorado’s unique tie to the federal tax code means that many tax breaks given by the federal government automatically roll down to Colorado. And TABOR makes it tough to roll them back if they don’t benefit the state.

H.R. 1 shows how this works

The effects become much clearer when you look at individual taxpayers. Let’s take the impacts of H.R. 1, the so-called One Big Beautiful Bill Act.That federal bill gave, on average, about a $70,000 tax break to the richest 1% of Coloradans, while Coloradans with low incomes saw about a $130 tax cut. When you add the increased costs working folks are paying for gas, energy, food and health care, typical families end up paying more and having less income.Only the richest people in our state have meaningfully benefited from the Trump tax policies.

Corporations get the same deal.

The way the tax code favors the wealthy and profitable corporations becomes even clearer when we add H.R. 1’s impact on corporations.The tax breaks for corporations in H.R. 1 are projected to result in a 45.2% decrease in corporate income tax collections in FY 2025-26 in Colorado, mirroring declines at the federal level. This is despite corporate profits topping $4 trillion in 2025.This decline will force more cuts to services that all Coloradans depend upon, from public schools and colleges to health care and child care.

Federal tax breaks often mean that big corporations operating in Colorado can reduce their taxable income to zero, paying no income taxes at the federal or state level. In 2025, at least 88 profitable corporations paid $0 in federal corporate income taxes despite reporting more than $105 billion in U.S. profits. Companies like Tesla and PayPal were among them.Read that again: Some big corporations with record profits paid $0, yes, zero, in federal corporate income taxes. According to Colorado’s 2024 Tax Profile and Expenditure Report, almost half of C corporations in Colorado paid zero Colorado corporate income tax.

TABOR makes this hard to fix.

Congress doles out these tax breaks, but TABOR makes them nearly impossible to undo.What other states handle with simple administrative or legislative fixes, like delinking the state tax code from tax breaks that force cuts to programs and services families depend on, usually requires costly legal battles or million-dollar ballot campaigns in Colorado because of TABOR.Usually, only the wealthy and well-connected have access to those kinds of tools, not average taxpayers.TABOR bills itself as a bill of rights, but working people have the receipts.

Take Action

Did you know there’s a statewide effort already underway to update Colorado’s outdated flat tax system? Protect Colorado’s Future is a growing coalition of parents, educators, health advocates, community leaders, and policy organizations working together to build a fairer tax code that actually funds the things families rely on — schools, child care, health care, safety, and economic opportunity. If you’re ready to move from receipts to results, learn more and get involved at ProtectColoradosFuture.com.