Will the wealthy flee Colorado if a graduated income tax is passed?

It’s a familiar threat from millionaires and big business: If you increase our taxes, we’ll leave the state.

And it’s become a central argument for the campaign against Amendment 87, which, if approved by voters in November, would reduce the income tax rate for individuals and businesses in Colorado making less than about $500,000 and raise it for those earning more to generate an estimated $2 billion in its first year for education, childcare and healthcare.

“When taxes go up, big businesses leave and take their good-paying jobs with them,” Michael Smith, the state director of the National Federation of Independent Business, said in a statement.

NFIB, like other major Colorado business groups, is campaigning against the ballot measure with radio and television ads.

But the reality is not so simple.

As the campaigns for and against Amendment 87 reach their fever pitch ahead of the Nov. 3 election, experiences from other states with graduated income tax systems show the doomsday departures are overstated. Yes, some rich people leave to avoid higher taxes. But, overwhelmingly, millionaires stay put.

In Massachusetts, where voters increased income taxes on earnings over $1 million to 9% from 5% in 2022, the mass exodus of wealthy residents tax critics predicted did not materialize.

From 2022 to 2023, nearly 30,000 more people left Massachusetts than moved in, according to a Boston Globe analysis of the most recent Internal Revenue Service data, one of the highest rates of outmigration in the country.

But more than 70% of the net loss in population came from people making less than $200,000 a year. And the tax hike has raised far more revenue from the wealthy than estimated.

At the end of the day, taxing the rich is a philosophical question as well as an economic one, said Jeff Hoopes, research director at the University of North Carolina’s Tax Center, even if the number of wealthy people and businesses leaving the state is small.

“How big should the government be and who should pay for it?” he said.

Doomsday downfall averted

Massachusetts, like Colorado, had a flat income tax in its constitution — meaning everyone was taxed at the same rate regardless of their earnings — before approving what is widely known as the “millionaire’s tax.” Massachusetts’ flat tax rate had been 5%. Colorado’s is currently 4.4%.

Massachusetts now has two personal income tax brackets: Those who make less than $1 million a year owe 5% and those who make more owe 9%. The state has a corporate income tax of 8%.

Amendment 87 would create six income tax brackets in Colorado starting at a rate of 3.7% for earnings up to $25,000 and climbing to 8.4% for income above $1 million. The change would apply to both individual taxpayers and businesses.

Those who make under about $500,000 annually — about 97% of Colorado taxpayers, according to nonpartisan legislative analysts  — would pay less than they do now by a few hundred dollars. Those making more than about $500,000 — about 100,000 taxpayers — would pay more. An individual or business earning $1 million would pay about $16,000 more.

As in Massachusetts, conservatives and business groups in Colorado are fighting Amendment 87, arguing that the tax increases will harm the state’s economy and eliminate jobs. And millions of dollars in untraceable money from conservative groups has flooded Colorado in recent weeks to oppose the amendment.

Colorado Gov. Jared Polis — a Democratic tech multimillionaire who has long broken with his party on tax policy — has come out against Amendment 87, saying the proposal would be “absolutely devastating” to the state’s economy. A group of business leaders on the governor’s “Competitiveness Council” urged voters to vote no on Amendment 87 in an open letter earlier this month, saying, “Raising Colorado’s top rate to 8.4 percent would send a damaging signal to the employers and investors we need to create jobs and sustain our economy.”

The Denver Metro Chamber of Commerce is opposing Amendment 87, saying, “The massive $2+ billion annual tax increase would make it more expensive for our local Main Street businesses to create jobs, operate and grow.”

One Denver tax attorney who has wealthy clients told The Colorado Sun that some of her clients are already working to reduce their tax burdens in Colorado ahead of the election by changing their addresses, driver’s licenses and voting registrations to Florida.

But research from other states shows the number of wealthy people who leave because of a tax increase for the rich is small.

Cristobal Young, an associate sociology professor at Cornell University who studies tax-driven migration, said individual income tax increases in other states did not lead to widespread exoduses. He has studied tax changes for the rich in New Jersey, which has a 10.75% personal income tax rate for earnings above $1 million, New York, which has 10.9% for earnings over $25 million, and California, which has 13.3% for earnings over $1 million.

“The tax flight story is empowering for people who feel that they can wield it: ‘I’m taking what’s mine and I’m leaving and you’ll be sorry when I’m gone’,” Young said. “But when you get down to the reality of tax migration, moving to another state is the most difficult of all things you can contemplate to reduce your tax burden.”

Studies show increases in corporate taxes affect business decisions about where to locate and whether to grow, but widespread closures and relocations are unlikely.

Jim Rooney, president and CEO of the Boston Chamber of Commerce, campaigned against the millionaire’s tax in Massachusetts because he was worried it would be a drain on the state’s economy and cause talented people to leave.

Now, four years later, Rooney said it’s too soon to tell what the total impact on the business climate of the state has been. What the IRS data doesn’t show, Rooney said, is how many people decided not to move to Massachusetts because of the tax.

It’s a challenge for businesses, Rooney said, but one that firms weigh against all the benefits of the Bay State.

In 2025, LEGO announced it was opening its U.S. headquarters in Boston and Hasbro moved its Rhode Island operations to Boston. Both, Rooney said, cited the local talent pool. But, it’s a mixed bag. That same year, Teradyne Robotics, headquartered in Massachusetts, announced it would open a factory in Michigan.

Instead of trying to repeal the tax, which Rooney suspects would be unsuccessful, he has tried to influence how the money is spent. Revenue from the tax has blown far past projections. Proponents estimated it would generate $2 billion each year. Last fiscal year, it brought in $3 billion and this year it is on track to bring in even more.

With the additional revenue, Massachusetts has expanded childcare subsidies to 18,500 low-income families, made community college free, provided free meals for K-12 students, eliminated fares on many buses and chipped away at an enormous backlog of repairs to roads, bridges and train tracks across the state.

“One could ask the question, ‘But for this tax would we be able to do those things?’” Rooney said. “There have been some good things that have happened.”

If passed, Amendment 87 would channel the money it raises to healthcare and education, Colorado’s two biggest expenses, as well as childcare. Facing budget shortfalls of more than $1 billion over the past two years, Colorado lawmakers have made cuts to Medicaid, affecting children with disabilities, and failed to sustain the state’s crumbling childcare system.

Proponents of the initiative say Colorado is out of options.

“We’re either going to cut healthcare for older adults or we’re going to bring in new revenue,” said Chris deGruy Kennedy, president and CEO of the Bell Policy Center, which is backing the amendment. “We can do that by raising everyone’s taxes or raising the taxes of those who can afford to pay more.”

Conservatives, however, argue that the state already spends too much on healthcare. And they say that raising taxes on businesses will increase costs for everyone at a time when prices are already high.

Mark LeValley, president of the Colorado Cattlemen’s Association, said in a statement that ranchers already face huge financial pressures from drought, high gas prices and shifting tariff policies.

“Now is not the time to drag these small businesses down any further,” he said.

Not all the millionaires are opposed

Colorado is one of only 14 states with a flat income tax.

Ron Guillot, a healthcare executive, supports proposed Colorado Amendment 87, which would replace the state’s flat income tax with a graduated income tax and dedicate additional revenue to K-12 education, healthcare and childcare. (Cheney Orr, The Colorado Sun via Report for America)

When taking into account sales taxes and property taxes, in addition to income taxes, the top 1% wealthiest families in Colorado, making more than about $851,000, spend the lowest share of their household income on taxes, according to the Institute of Taxation and Economic Policy. Middle and lower income families spend the most.

That’s one of the reasons Denver millionaire and healthcare executive Ron Guillot supports Amendment 87.

Guillot and his wife, a dermatologist, bring in about half their income through investments, he said, adding that once you have money, it’s much easier to make money.

“You’re not working for that money,” Guillot said. “What’s the big deal? You eat out 10 times less at Vail during ski season, but you’re helping poor people get childcare and healthcare and a better education.”

He’s not alone. Merle Chambers, a major Democratic donor in Colorado who used to work in the oil and gas industry, has given $500,000 to the Amendment 87 campaign.

James Iacino, a Fort Collins millionaire who is the former owner of Seattle Fish Company, a Colorado business founded in 1918, and former Democratic candidate for the 3rd Congressional District, said he doesn’t think anyone in his tax bracket is going to leave because of the tax increase.

“I don’t think it drives the decision as much as people would like to put that fear out there,” he said. “I’m paying a little bit more to benefit 97% of Coloradans who are going to see their taxes go down, and see the services they need to thrive. That’s a no-brainer trade off in my opinion.”

Small Business Majority, a national association of small businesses, also supports Amendment 87.

Alejandro Flores-Muñoz founded food truck business Combi Tacos in Denver in 2018. Since then he has opened a new kitchen, expanded the business to catering for corporate events and weddings and contracted with the city of Denver to provide meals for two homeless shelters. This year he was able to hire nine people full time, plus 11 people who work as needed at events.

Alejandro Flores-Muñoz, founder of Combi Tacos, supports Amendment 87. (Cheney Orr, The Colorado Sun via Report for America)

Flores-Muñoz was shocked to learn about Colorado’s flat income tax rate. He’s supporting Amendment 87 even though he said it would increase his tax burden because he hopes it will help his employees who struggle with healthcare and childcare.

“I believe that our tax system should reflect a shared responsibility,” he said. “If we invest more in childcare, healthcare, education, all of these things help our families.”

Still, some Democrats are steering clear of the proposed tax change.

One of the most vocal supporters of Massachusetts’ millionaires tax was then-attorney general, now-Gov. Maura Healey. The tax also had the backing of Democrats from the Boston mayor to the state’s senators.

In Colorado, attorney general and gubernatorial hopeful Phil Weiser said he can’t weigh in on Amendment 87 because of active litigation about the ballot measure that he’s involved with as attorney general. The amendment doesn’t have the backing of either Democratic U.S. senator from Colorado. Former U.S. Senator and U.S. Ambassador to Mexico Ken Salazar, a Democrat, is featured in a video ad urging Coloradans to vote no.

The fate of the state’s tax system will come down to voters.

Colorado Graduated Income Tax Calculator

Colorado · Proposed for tax years 2027+

See what you’d owe under Amendment 87’s proposed six-bracket structure versus Colorado’s current 4.4% flat rate. Enter your federal taxable income.

Type of Story: News

Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.