The Tax Foundation

Research Areas

Colorado

The Facts on Colorado's Tax Climate

Here are some basic facts on Colorado’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 23 in Colorado
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Colorado taxpayers had to work until April 23, the same day as national Tax Freedom Day, to pay their total tax bill, ranking the state 15th highest nationally. The Tax Freedom Days of neighboring states are: Arizona, April 20 (ranked 20th nationally); Utah, April 21 (ranked 17th nationally); Wyoming, April 20 (ranked 21st nationally); Nebraska, April 19 (ranked 25th nationally); Kansas, April 18 (ranked 26th nationally); Oklahoma, April 11 (ranked 43rd nationally); and New Mexico, April 12 (ranked 42nd nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Colorado's State/Local Tax Burden Below National Average in 2007
Over the past 17 years, Colorado’s tax burden has fallen from 22nd highest in 1990, around the national average, to currently standing below the national average. Over this period of time, individual incomes of taxpayers have risen faster than state-local tax collections thanks largely to the unique Taxpayer’s Bill of Rights amendment in the state’s constitution. Estimated at 10.4% of income, Colorado’s state-local tax burden percentage ranks 30th highest nationally, below the national average of 11.0%. Colorado taxpayers pay $4,509 per capita for state and local taxes, and per capita state income is $43,512.
Colorado's State-Local Tax Burden, 1970-present

Colorado’s 2008 Business Tax Climate Ranks 13th
Colorado ranks 13th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states were as follows: Arizona (25th), Utah (17th), Wyoming (1st), Nebraska (43rd), Kansas (33rd), Oklahoma (19th) and New Mexico (23rd).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Colorado’s Individual Income Tax System
Colorado's personal income tax system consists of a flat tax of 4.63% on the entirety of an individual's taxable federal income. That top rate ranks 38th highest among states levying an individual income tax. In 2005 Colorado's individual income tax collections were $809 per person, which ranked 19th highest nationally. Since most small businesses are either S Corporations or partnerships or sole proprietorships, they pay their business taxes at the rates for individuals. The state's low income tax rate makes the tax environment for small businesses in Colorado competitive compared to other states.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Colorado’s Corporate Income Tax System

Colorado's corporate tax structure consists of a flat rate of 4.63% on all corporate income. Among states levying corporate income taxes, Colorado's rate ranks 45th highest nationally. In 2006, state-level corporate tax collections (excluding local taxes) were $96.28 per capita, which ranked 39th highest nationally among states that tax corporate income.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Colorado Levies Sales Tax at Lowest Rate in the Nation; Gasoline and Cigarette Taxes Near National Average
Colorado levies a 2.9% general sales or use tax on consumers, the lowest rate among states levying a sales tax. In 2005, state and local governments combined collected $1,219 per person in general sales taxes, which ranked 26th highest nationally. Colorado's gasoline tax stands at 22 cents per gallon (30th highest), while its cigarette tax stands at $0.84 per pack of twenty (30th highest). The sales tax was adopted in 1935, the gasoline tax in 1919 and the cigarette tax in 1964.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Colorado Property Taxes: Middle of the Pack
Colorado's local governments collected $4,722,286,000 in property taxes during fiscal year 2004, the latest year for which the Census Bureau has published state-by-state data. Colorado is one of the 13 states that collect no state-level property taxes, meaning its per capita property tax collections equaled $1,026 for all levels of government in FY 2004, ranking it 23rd nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Colorado is a Donor State
Colorado taxpayers receive less federal funding per dollar of federal taxes paid compared to the average state. Per dollar of federal tax collected in 2005, Colorado citizens received approximately $0.81 in the way of federal spending. This ranks the state 41st nationally, the same ranking as in 1995 when Colorado received $.95 per dollar of taxes in federal spending. Neighboring states and the amount of federal spending they received per dollar of federal taxes paid were: Arizona ($1.19), Utah ($1.07), Wyoming ($1.11), Nebraska ($1.10), Kansas ($1.12), Oklahoma ($1.36), and New Mexico ($2.03).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Articles from the Tax Foundation