A progressive income tax is a pretty quick way to destroy a state.
This article was first published on September 30, 2026 in Complete Colorado.
Adopting a progressive income tax—as proposed this year by Colorado Amendment 87—is a pretty quick way to destroy a state. You can see this in another state’s sad experience. More on that below.
A “progressive” (or “graduated”) income tax is an income tax punitive as to income. In other words, when you earn more, your liability doesn’t just go up. It accelerates. Work hard, take in an extra dollar, and the state “rewards” you with a higher tax bracket (and, in the case of Amendment 87, unindexed for inflation).
There some obvious moral flaws in a policy like that. It is fueled by envy, in violation of God’s Tenth Commandment. It encourages sloth and punishes those who become successful by providing “added value” to their fellow human beings.
But progressive taxation is also stupid policy. You can see this in the economic statistics.
Today’s universities provide powerful incentives for publishing stuff that supports leftist ideas (such as the progressive income tax), and corresponding disincentives for publishing conclusions to the contrary. Despite those incentives, the dirty truth about progressive income taxes has been leaking out through a series of academic studies.
That truth is, that progressive income taxes discourage prosperity and promote economic stagnation.
Put another way, they don’t just hurt the taxpayer who writes the check. They hurt almost everyone else as well.
And, yes, I know that state economies differ and are influenced by factors other than taxes. But the studies take account of all that.
Montana’s experience
They say that a stupid man (sometimes) learns from his own mistakes. But a smart one learns from the mistakes of others. So while studies are useful, so are real-life stories.
If Coloradans are smart, they will learn from a real-life story arising in a state that in many ways is much like Colorado.
The state is Montana.
You see, Montana traveled the progressive income tax road, and that road led straight to perdition. But the story has a happy ending, because Montana changed her ways and came back to the world of the living.
The original 1889 Montana Constitution was based heavily on Colorado’s original state constitution. The original Colorado Constitution authorized only the property tax, and Montana’s authorized only two: property levies and corporate franchise fees. But in 1934, Montanans amended their constitution to authorize a state income tax.
Still, for many years the situation wasn’t too bad, because the legislature kept the top bracket at a modest four percent, finally raising it to five percent in 1958. Also, Montana doesn’t have a general sales tax.
(By contrast, the sponsors of Amendment 87 want an 8.4 percent income tax bracket, in addition to Colorado’s stiff state and local sales levies.)
Unfortunately, during the 1960s, Montana went through a rage for income tax “progressivity.” The legislature jacked the top marginal rate up to 7 percent, then 7.9, then to 10, and in 1969 to 11 percent.
Shortly after this process started, the state’s relative economic position began to tank. In 1965, Montana ranked 26th among states—about the middle of the national pack—in per capita income. By 1971, she had dropped to 30th. By 1981, to 35th. By 2000, 44th.
As usually happens when states enact demagogic measures allegedly targeted at “the rich,” it was people of modest means who suffered most: Average Montana salaries dropped to dead last in the nation (1988 to 1994).
But these statistics hardly begin to tell the story. Even sadder is the part about family breakup.
Montana is a family-oriented state, but young people couldn’t make a living there. So they fled in droves. Montanans formed ex-pat communities-in-exile in places like Elko, Nevada.
Montanans shook their heads, and said, “Our state’s most precious export are her young people.”
Budget deficits follow
But here’s a real kicker: One motivation for raising the progressive income tax was to fund government—lots and lots of government. (Montana had one of the largest per-capita bureaucracies in the country.)
But even that didn’t work out.
Because the progressive income tax discouraged enterprise, state tax revenue often fell below estimates, causing deficits. Again and again the legislature had to address budget crises in its general session, only to be called back into special session to re-balance a budget because revenues had fallen short.
And yet through this period, the only “solution” the state’s ruling class could see was raising taxes even further!
Happily ever after
Fortunately, this story has a happy ending. As a highly-visible Montana grassroots political leader and gubernatorial candidate during the 1990s, I strongly promoted income tax cuts, particularly a flat tax. Finally, in 2003, the legislature sliced the 11 percent income tax bracket down to 6.9 percent.
Howls of outrage rolled in from the Left: “Cutting taxes will blow a hole in the budget!” “Cutting taxes will create permanent deficits!”
But none of that happened.
From a 2000 base of 44th in the nation, Montana’s per capita personal income began to rise. By 2008, it was up to 35th. Revenues started to pour in, creating budgetary surpluses.
By 2022, Montana’s per capita income rank was up to 31st. The legislature pressed the accelerator bit more—dropping the top rate to 6.75 percent. Then in 2023 lawmakers cut it to 5.9 percent. And now it’s 5.65 percent, with a scheduled drop to 5.4—and a governor promoting a 4.7 percent flat tax.
Meanwhile, Montana’s personal income rank had risen to 27th—back in the middle of the pack, where she had been before the disastrous “progressive tax” experiment. And over the last five years, budgetary surpluses have been massive.
With a history like this, it takes a pretty special kind of person to want to inflict a progressive income tax on Colorado. And by “special,” I don’t mean “good.”
