Federal tax reform doesn’t happen in a vacuum and for Colorado, the fiscal consequences of the One Big Beautiful Bill Act (OBBBA) are already taking shape.
According to new reporting from Axios Denver, Colorado’s Office of State Planning and Budgeting is forecasting a $1.2 billion revenue shortfall for the fiscal year. The driving cause? Provisions in OBBBA that alter how state taxable income is derived from federal AGI, including:
The state’s flat individual income tax is directly linked to federal definitions, so even tax relief at the federal level can mean less revenue for the state.
Colorado’s tax system conforms to federal AGI for both individuals and businesses. As a result, these OBBBA provisions shrink the state tax base:
These reductions come amid rising healthcare, education, and wildfire prevention costs, increasing pressure on state lawmakers.
Gov. Jared Polis is expected to call a special legislative session in August. Possible responses include:
The state may also revisit proposed increases to cannabis excise taxes or luxury service fees.
Colorado’s projected shortfall is a case study in how federal tax relief can produce state-level strain. For multistate businesses and advisors, the lesson is clear: state coupling rules matter.
Bizora’s state tax engine keeps you ahead of legislation that breaks or reinforces federal-state alignment. Whether you’re tracking addbacks, tax base erosion, or new surcharges, our AI helps you plan, not just react.