A Colorado initiative slated to appear on the Nov. 6 ballot as Amendment 73 would increase the corporate income tax rate by 1.37 percentage points for tax years beginning on or after Jan. 1, 2019 if passed by voters. The proposed increase would raise the corporate income tax rate from the current rate of 4.63 percent to 6 percent.
Of states with a uniform income tax rate applicable to all corporate taxpayers, Colorado’s is the second lowest, behind only North Carolina. If the rate increase goes into effect, Colorado’s corporate income tax rate will leap over the 2018 rate of six other states (Arizona, Florida, Indiana, Kentucky, South Carolina, and Utah) landing in a tie for eighth lowest with four states (Georgia, Michigan, Oklahoma, Virginia).
Tax revenue from the increase is earmarked for the state’s Quality Public Education Fund. In a Fiscal Impact Report released at the beginning of this year, Colorado estimates an increase of $88.5 million in public education funding for the 2018-19 fiscal year attributable to the proposed corporate income tax increase. Estimates more than double for the 2019-20 fiscal year, projected at $179.9 million dollars in increased corporate tax revenues. Corporate income taxpayers with income tax liability will pay an estimated $11,085 extra per year on average, according to the state’s report.
Amendment 73 would also increase revenue through proposed individual income tax hikes by amending the state’s constitution. The amendment would allow individual income to be taxed at more than one rate, permitting Colorado to use tiered brackets of income, common in other states. The report estimates a combined fiscal impact of approximately $2.326 billion through fiscal year 2019-20 for the proposed corporate and individual income tax increases combined.
This wouldn’t be the first ballot initiative to increase education revenue for Colorado. The state-wide ballot initiative to legalize marijuana resulted in a constitutional amendment, Colorado Amendment 64, which produced a tremendous amount of tax revenue for the state, including funds earmarked for education. In the 2017-18 revenue year, marijuana revenue provided $90.3 million in state education funding, according to the Colorado Department of Education. Will Amendment 73 garner the same support as Amendment 64 at the ballot box? Parents, teachers, and corporate taxpayers alike are waiting to find out.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Is Colorado likely to pass the ballot initiative creating Amendment 73? Why or why not?
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