Politics

What is Colorado Prop 121: State income tax rate reduction

Colorado’s Proposition 121 would cut the state income tax rate from 4.55% to 4.40% for individuals and corporations starting for the tax year of 2022, and each year moving forward. State income taxes are collected in the general fund, which is the main funding source for the government operations like education, human services and corrections. Last year Colorado’s income tax collected $10.7 billion, accounting for 68.4% of the general fund.

If Proposition 121 were to pass the state would collect approximately $412.6 million less for the budget year of 2023-2024, approximately a 2.4% reduction to the general fund.

The case for: Proposition 121 would mean that taxpayers pay the state less money each year. The reduction is not expected to change the money available for state spending for at least three years. This is, in part, because the state collects more taxes than it uses for programs.

The case against: Most taxpayers will see a cut of less than $63 per year while wealthy taxpayers and corporations will see the greatest benefit of the cuts. Those grossing more than $1 million each year, less than 1% of taxpayers, will see nearly half the total tax savings if the measure passes. During years when the state collects taxes above its TABOR (Taxpayer’s Bill of Rights) limit, the amount of money refunded to taxpayers could go down. In addition, if another recession hits, the measure would mean that the state will have less money in savings.

Ballot question: “Shall there be a change to the Colorado Revised Statutes reducing the state income tax rate from 4.55% to 4.40%?”

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