![]() ![]() The idea of a flat tax is if everyone pays the same percentage of their income, then it’s fair for everyone. ![]() For Colorado, that means all income is taxed at 4.63 percent. Nine states have no income tax and use other taxation, such as increased sales taxes and/or property taxes, to plug funding holes that would otherwise come from income tax.Ī flat tax means every dollar of income is taxed at the exact same rate. Eight states, including Colorado, have a flat tax. However, there are 17 states that have different systems for income taxes. Most states tax income in the way described above - through a progressive income tax. Source: Colorado Legislative Council’s Office The graphic below illustrates the history of Colorado’s income tax rates. This model was enshrined in the Colorado Constitution in 1992 with the passage of the Taxpayer Bill of Rights (TABOR ) and the flat tax system continues to this day. That changed in 1987 when a flat tax was instituted by the state legislature, taxing all income at the same rate. While Colorado’s rates shifted throughout the years, it was always a progressive system in which the wealthy paid a higher percentage of their income than those at the lower end of the income ladder. Colorado had a progressive - or “graduated” - income tax for decades. With conversations about taxing upper-income individuals heating up across the country, many people are surprised to learn a progressive income tax system isn’t even an option in Colorado. Most states use a progressive income tax system, where tax rates increase along with one’s level of income. One key area to consider is distribution of income taxes. It’s important to understand how they are structured and what they say about the priorities and values of the gov ernment putting them in place.
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