SB25-138 would make Colorado’s current temporary income tax reductions permanent and set a path to eliminate state income tax on individuals, estates, and trusts beginning with tax years starting on or after January 1, 2035. Under the bill, the 4.25% rate that is currently scheduled to apply beginning in 2025 would become the permanent rate, and any additional rate reductions that occur under the state’s excess-revenue refund mechanism would also become permanent for future years. The bill also removes state income tax liability for individuals, estates, and trusts after 2035 and bars those taxpayers from claiming income tax credits after that date, with any unused carry-forward credits expiring at the end of 2034.
For corporations, the bill similarly makes the 4.25% rate permanent beginning in 2025 and ties future rates to any reductions made under the excess-revenue refund statute. It also revises filing and withholding provisions to account for the eventual end of income taxation for individuals, estates, and trusts, including directing the Department of Revenue to create alternative forms for taxpayers who must file for reasons other than reporting federal taxable income after 2035. The bill also amends the statute governing temporary rate reductions from excess state revenues so that those reductions would continue to apply to the permanent rate structure, and it repeals part of that section in 2035.
The bill’s practical impact would be substantial: it would permanently lower Colorado’s income tax rate structure, reduce future state general fund revenue, and eventually eliminate the state income tax on most non-corporate taxpayers. It would affect individual taxpayers, estates, trusts, fiduciaries, and corporations, as well as the Department of Revenue, which would need to administer new filing rules and forms. The bill also interacts with Colorado’s Taxpayer’s Bill of Rights refund framework by changing how excess revenues are returned through income tax rate adjustments.
The overall sentiment reflected in the voting history was unfavorable to the bill in committee. In the Senate State, Veterans, & Military Affairs Committee, a motion to refer the bill to Appropriations failed, and the committee then voted to postpone the bill indefinitely, effectively killing it at that stage. No committee transcript was provided, so the available record shows the procedural outcome but not detailed debate.
The main point of contention appears to be the fiscal impact and policy choice of making tax cuts permanent, especially given the bill’s eventual elimination of income tax for individuals, estates, and trusts. Supporters would likely view the measure as tax relief and a simplification of the tax code, while opponents would likely be concerned about long-term revenue losses, reduced funding for state services, and the interaction with constitutional refund requirements. The committee’s action suggests that concerns about cost and feasibility outweighed support for advancing the bill.
The bill would amend Colorado’s income tax statutes to permanently set the individual, estate, trust, and corporate income tax rate at 4.25% beginning in 2025, preserve any future temporary reductions as permanent, and eliminate state income tax for individuals, estates, and trusts beginning in 2035. It would also eliminate the ability of those non-corporate taxpayers to claim income tax credits after 2035, require the Department of Revenue to create alternative filing forms for certain post-2035 filings, and revise the excess-revenue rate reduction statute to conform to the new permanent rate structure.
The available voting history indicates the bill did not have enough support to advance in the Senate State, Veterans, & Military Affairs Committee. A motion to send the bill to Appropriations failed, and the committee then postponed the bill indefinitely, which is a negative outcome for the measure. With no transcript available, the record suggests skepticism or opposition centered on the bill’s fiscal consequences rather than a detailed public debate.
The central contention is between tax-cut proponents and those concerned about state revenue stability. Supporters would likely favor permanent income tax reductions and eventual elimination of the tax for individuals, estates, and trusts, while opponents would likely object to the long-term loss of revenue and the impact on the state budget and public services. Another likely point of debate is the bill’s interaction with TABOR refund mechanisms, because it changes how excess revenues are handled and could reduce the state’s flexibility in future fiscal years.