Think you could do a better job than the legislature does when it comes to setting taxes?
Just how much would a top income tax rate similar to New Jersey’s cost Connecticut’s millionaires?
Does it really save much money to shave a few points off the sales tax?
With final negotiations on a state budget set to begin this week, Comptroller Kevin P. Lembo has launched a new “Do-It-Yourself Tax Calculator” website that allows viewers to test their own revenue proposals.
“As state lawmakers are in the height of debate and deliberations on the state budget, this … puts tax changes in broad perspective for everyone, whether you’re an academic, journalist or a dinner-table debater on tax policy,” the comptroller said. “What might happen if we tweaked the rate for citizens on the low or high ends of the income bracket? If the state eliminates a tax credit or exemption, how far will it move the financial needle?
For example, Connecticut’s top marginal rate on the income tax stands at 6.7 percent, and applies to earnings above $250,000 for singles and $500,000 for couples.
Some advocates for a more progressive income tax have argued that Connecticut’s top rate should be closer to the 8.97 percent rate New Jersey charges its wealthiest households.
According to the tax calculator, this would yield an extra $875 million per year for Connecticut — enough to close more than two-thirds of the $1.2 billion shortfall projected in the fiscal year that begins July 1.
The calculator site displays rates in the state’s major tax categories — income, sales, corporate income, gasoline and other fuels — as well as various credits and exemptions.
It also displays the annual revenue each of these tax policies currently raises.
Viewers can change rates and eliminate credits or exemptions and see displayed the corresponding revenue change.
The goal, Lembo said, is not to mobilize public support for any particular tax hike or reduction.
“It’s consistent with the work I’ve been doing around trying to produce greater transparency around the state’s finances,” the comptroller said. “This is a piece, obviously, of that larger transparency effort.”
The General Assembly currently is considering a measure Lembo crafted that would enhance disclosure rules around the various business tax and other financial incentives state government uses to encourage economic development.
Lembo added that while he hopes this site can provide the public with greater insight into the state’s revenue system, the connection with tax rates and dollars raised is just one piece of a much larger puzzle.
“It’s not a tool that any of us should use, exclusively, to set public policy,” he said. “But it does help as people are thinking things through.”
The legislature’s two budget-writing panels, the Appropriations and Finance, Revenue & Bonding committees, issued their proposals for the next two fiscal years on April 19.
Leaders from those panels are set to begin negotiations this week with Gov. Dannel P. Malloy’s budget office on a new biennial budget.
The governor said last week he is optimistic that a final compromise can be enacted before the regular 2013 legislative session ends June 5.
Malloy insists he has not proposed any tax increases, though his budget plan would raise more than $190 million in new revenue.
The governor’s proposals include the following:
- A 20 percent surcharge on the corporation tax would be extended through the next biennial budget, raising an extra $44 million in 2013-14 and $74 million in 2014-15;
- A cap on an insurance premium tax credit within the corporation tax system would be maintained in the new budget, raising an extra $27 million in each fiscal year;
- A tax on power plants set to expire June 30 also would be extended. This would raise $70 million next fiscal year. The finance committee opposes this extension;
- And a reduction in the state Earned Income Tax Credit from 30 percent to 25 percent of the federal EITC. This would cost Connecticut’s poorest working families a total of about $21 million next fiscal year, though the administration notes that the state’s EITC would remain one of the most generous in the nation.