Panel wants higher state taxes for the rich [CT Post]

May 1, 2015

Article as it appeared in the Connecticut Post

HARTFORD — The state’s wealthiest residents would see an income tax increase, while those in some of its poorest cities would see their car taxes decrease under a budget proposal approved Wednesday by the Finance Commitee of the General Assembly.

The bills, which would bring the state about $1.8 billion in new taxes, pushed through the Democrat-dominated committee despite solid Republican opposition. But the plan received a mixed review from Gov. Dannel P. Malloy, who in February proposed a two-year, $40-billion budget with minimally increased taxes.

Malloy said the budget “asks far too much of Connecticut’s middle class and small businesses,” but stopped short of a veto threat.

The budget plan technically heads to the Senate next, but will in fact become the center of closed-door talks between legislative leaders and the governor, as they negotiate a compromise budget that will take effect July 1.

Under the plan, individuals who earn $500,000 and joint filers with $1 million incomes would see their tax rate increase from 6.7 to 6.99 percent, a change that is projected to raise $102.4 million in the first year and $94.7 million in the second year.

It would also add a 2-percent capital gains tax for those with the same high income levels, raising a projected $167.6 million in the first year and $178 million in the second year, according to an analysis from the non-partisan legislative Office of Fiscal Analysis.

“I think it’s not just a bad tax decision, it’s a bad economic decision for the state of Connecticut,” Joe Brennan, president and chief executive officer of the Connecticut Business & Industry Association, said, adding that 6.99 percent would give the state a higher effective tax rate that neighboring New York state.

Brennan called the budget proposal very discouraging, with about 30 new taxes to more than offset a planned reduction in the sales tax from the current 6.35 percent to 5.35 percent over two years.

He recalled that before 1991, when Connecticut adopted its income tax, the state was able to attract New Yorkers. And even after the contested adoption of a personal income tax, the rate was still lower than New York.

“People with wealth are mobile, very mobile,” he said. “And we have seen people with wealth pushed out of the state, wealth and capital that we sorely need right now.”

According to the state Department of Revenue Services, in 2013 there were 15,818 joint and single filers with incomes between $500,000 and $1 million; 5,827 with incomes between $1 million and $2 million; and 3,976 with incomes of more than $2 million. Those making more than $500,000 paid $3.14 billion in income taxes in 2013, the latest year statistics are available.

Car-tax cap

The Connecticut Conference of Municipalities said that at first review, the bill that would allow cities and towns the option to cap their vehicular property taxes at 29.36 mills seems good, as long as the state promises to make up for the lost revenue.

In the case of Bridgeport, taxpayers would save about $6 million a year under the cap, said Sen. Marilyn Moore, D-Bridgeport. The bill would allow towns with low mill rates, such as Greenwich’s 11 mills, to remain in effect.

Sen. John Fonfara, D-Hartford, co-chairman of the Finance Committee, said that money diverted from sales tax would be used to refund the cities for the car-tax revenue lost.

“I believe all towns are winners,” Fonfara said.

Sen. L. Scott Frantz, R-Greenwich, ranking member of the committee said the plan would set a bad precedent.

“It starts to smell a little bit like some kind of redistribution plan,” Frantz said. “It does cause me to be very concerned that this could be opening a door or a venue to have abuse down the road if this gets passed into law. It’s a half a percent of the sales tax, but maybe five years down the road that becomes a one-and-a-half percent, two percent component of the overall state sales tax and maybe our sales tax is up about 9-and-a-half percent.”

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