Free Daily Headlines :

  • COVID-19
  • Vaccine Info
  • Money
  • Politics
  • Education
  • Health
  • Justice
  • More
    • Environment
    • Economic Development
    • Gaming
    • Investigations
    • Social Services
    • TRANSPORTATION
  • Opinion
    • CT Viewpoints
    • CT Artpoints
DONATE
Reflecting Connecticut’s Reality.
    COVID-19
    Vaccine Info
    Money
    Politics
    Education
    Health
    Justice
    More
    Environment
    Economic Development
    Gaming
    Investigations
    Social Services
    TRANSPORTATION
    Opinion
    CT Viewpoints
    CT Artpoints

LET�S GET SOCIAL

Show your love for great stories and out standing journalism

Estate tax measure may preview 2017 state tax debate

  • Money
  • by Keith M. Phaneuf
  • March 22, 2016
  • View as "Clean Read" "Exit Clean Read"
This is a photo of Sheldon Toubman, an attorney with the New Haven Legal Assistance Association, one of the plaintiff attorneys.

Arielle Levin Becker :: The CT Mirror File Photo

Sheldon Toubman, an attorney with the New Haven Legal Assistance Association.

Democrats and Republicans alike concede any proposal to raise state taxes has virtually no chance of passing at the Capitol this spring — even with huge budget deficits looming in the near future.

But the 2017 legislative session — which opens two months after the November legislative elections — is a different story.

And last Friday’s public hearing before the Finance, Revenue and Bonding Committee — and in particular competing testimony on the estate and gift taxes — offered a preview of the debate some expect to dominate the next session.

On one side, businesses and fiscal conservatives argued to eliminate the tax. The hundreds of millions of dollars it draws annually from the wealthiest families makes Connecticut a national outlier — goes one argument — and removing it will keep those families moving and paying taxes in another state.

On the other side, labor unions, social service advocates and other progressive groups charge that the tax is essential to redistribute wealth in a state whose tax network has favored — even shielded — the rich for more than two decades.

And the stakes in this battle, even though it probably won’t be fought for another year, are huge.

The legislature’s nonpartisan Office of Fiscal Analysis is projecting massive deficits, topping $2 billion, in both 2017-18 and 2018-19, the first two new fiscal years after the November elections.

In addition, economists, analysts, legislators and Gov. Dannel P. Malloy’s administration all have warned that eroding state tax revenues — which already have contributed largely to these projections — could worsen when revenues are re-assessed in late April or in mid-November.

“We don’t want to see a continued exodus of wealth from this state,” Bonnie Stewart, tax specialist for the Connecticut Business and Industry Association, told the finance committee last week.

“We risk being left behind,” said Zach Janowski, director of external affairs for the Yankee Institute, a conservative public policy group. “It hurts all of us who remain here and want to see Connecticut thrive. … We create millionaires in Connecticut and then they leave.”

And the tax isn’t just a problem for the wealthy, said Rep. Chris Davis of Ellington, ranking GOP representative on the finance committee.

Parents owning a particularly large farm might have to sell it simply because their children, who otherwise would inherit it and continue to work the land, can’t afford to pay the estate tax, he said.

Janowski and Stewart were referring to estate and gift taxes expected to collect $217 million this fiscal year.

Connecticut levies a tax on estates valued at more than $2 million, and the CBIA and Yankee Institute aren’t the only groups raising concerns about this tax.

The State Tax Panel, a group charged by the legislature over the last two years with studying state taxes, recommended in December that Connecticut look for ways to at least mitigate the estate levy.

It noted that the federal tax only targets estates valued at more than $5.4 million, and that most other states either don’t levy such a tax, or adhere to the federal threshold.

But that same panel also recommended no immediate changes to the estate and gift taxes. And with surging pension and other retirement benefit costs expected to burden the state budget for the better part of two decades, some argue that no state taxes will be dropping any time soon.

More importantly, according to Lindsay Farrell, director of the Connecticut Working Families Party, the estate tax is one of the few levies that tries to restore balance to a tax system that already overburdens the middle-class here.

Rep. Rick Lopes, D-New Britain

Rep. Rick Lopes, D-New Britain

In 1991, just before the state income tax was enacted, the state placed a 7 percent levy on capital gains, and a top rate of 14 percent on dividends.

But once the income tax was enacted, capital gains and dividends faced the same top rate as all other types of income at 4.5 percent.

While the top marginal rate has grown to 6.99 percent since then, rates have risen on the middle class as well. Most middle income families now face a top rate of 5.5 percent.

And research shows municipal property taxes continue to hit middle- and lower-income families the hardest. A state tax incidence report released in December found households earning less than $48,000 per year effectively pay nearly one-quarter of their annual income to cover state and local taxes — with the property tax taking the most. That study included families and individuals that rent their housing, and whose rental charges reflect the property taxes their landlord must pay.

Further complicating matters, a $500 state income tax credit offered to the middle class to offset property taxes has ben whittled down to $300 this year, and drops to $200 next year.

“The estate tax is one of our most sensible taxes,” Farrell said, adding that “we just simply cannot afford any cuts in revenue.”

Sheldon Toubman, an attorney with New Haven Legal Assistance Association and an advocate for social services recipients, asked the finance committee to do more than simply preserve the estate and gift taxes.

“The safety net is being threatened with decimation because of the huge budget deficit,” Toubman said. “If that should happen, my clients would go without critical services, imperiling their health and, in some cases, even their lives. In addition, the budget deficit is threatening massive layoffs of state employees, many of whom are involved in direct service to our low-income clients.”

Toubman’s solution is for Connecticut to embrace the proposal of two New York state legislators, and look to the financial services sector — and hedge funds in particular — to contribute more.

Assemblymen Jeffrion Aubry and Sean Ryan have proposed amending the New York state income tax to collect funds that they argue hedge funds should be paying through the federal income tax, but don’t.

At issue is “carried interest,” which refers to one type of compensation hedge fund managers receive in the form of a percentage of their funds’ profits.

The federal government treats this interest as a long-term capital gain, which is taxed at 20 percent, rather than at the top marginal rate for more traditional income, which is 39.6 million.

In other words, Toubman says, if Congress won’t collect this money through the federal tax, Connecticut should scoop it up with state taxes.

Sen. L. Scott Frantz, R-Greenwich

CTMIRROR.ORG File Photo

Sen. L. Scott Frantz, R-Greenwich

Hedge fund principals “are not putting anything at all of their own at risk; rather, they are simply taking chances with other people’s money,” Toubman said. “The only reason that the federal tax loophole has not been fixed at the federal law is that wealthy individuals have lobbied extensively to maintain this special tax break relative to other individuals at the same high income level.”

But Sen. L. Scott Frantz of Greenwich, ranking GOP senator on the finance committee, said that if the estate tax already gives Connecticut a national reputation for punishing wealth, singling out hedge funds would send a negative message that would decimate the financial services sector of the economy.

“You’re talking about going after very bright people with the ability to move very easily,” Frantz said. “Why would you give them a reason to locate somewhere else? We want them here paying taxes.”

Rep. Rick Lopes, a Democrat from the blue-collar city of New Britain, said he hasn’t seen any hard data showing Connecticut’s wealthiest are fleeing the state faster than any other groups, such as college graduates who are struggling to find work.

“There seems to be a lot more anecdotal information about (wealthy) people leaving than facts and figures,” he said.

Sign up for CT Mirror's free daily news summary.

Free to Read. Not Free to Produce.

The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.

YES, I'LL DONATE TODAY

ABOUT THE AUTHOR

Keith M. Phaneuf A winner of numerous journalism awards, Keith Phaneuf has been CT Mirror’s state finances reporter since it launched in 2010. The former State Capitol bureau chief for The Journal Inquirer of Manchester, Keith has spent most of 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. A former contributing writer to The New York Times, Keith is a graduate of and a former journalism instructor at the University of Connecticut.

SEE WHAT READERS SAID

RELATED STORIES
CT lawmakers call for funding to stop ‘mass killing’ of Black and brown children
by Kelan Lyons

Lawmakers identified a $5 billion proposal by the Biden administration, and marijuana and sports-betting legalization efforts, as potential funding.

Lamont faults CDC on J&J vaccine pause: ‘I would have handled it differently’
by Mark Pazniokas

Gov. Ned Lamont and other governors expressed dismay to the White House over pausing the Johnson & Johnson vaccine.

A little-known technical bill could be the key to more money for core programs
by Keith M. Phaneuf

Appropriations Committee leaders have a new strategy to more pump state dollars into education, social services and health care.

GOP retains Monroe-Newtown seat in CT House
by Mark Pazniokas

Republican Tony Scott of Monroe won a special election Tuesday in the 112th House District of Monroe and Newtown.

Auditors: UConn Hartford campus construction cost $30M more than budgeted
by Keith M. Phaneuf

Construction and renovations combined originally were priced at $87 million. Final cost: $116.7 million.

Support Our Work

Show your love for great stories and outstanding journalism.

$
Select One
  • Monthly
  • Yearly
  • Once
Artpoint painter
CT ViewpointsCT Artpoints
Opinion A healthcare system too broken to fix
by Sosena Kedebe MD

On March 25, the White house announced that it was going to invest over $6 billion in health centers that are funded through the Resources and Services Administration (HRSA) in order to expand COVID-19 vaccinations and other health services provided to vulnerable populations. As a chief medical officer for a health center that is strained to reach some of the most disenfranchised patient population in Hartford, this was great news. Yet there was a part of me that took the news with a deep concern. Why you might ask?

Opinion The Connecticut Juvenile Training School and the lie that built it
by Colleen Shaddox 

Sitting in the paddy wagon, I was afraid – maybe apprehensive was a better word, since I rightly suspected that white privilege would guarantee me good treatment.  Still, I said a prayer of thanksgiving. After years of advocating for people in our carceral system, I was given a chance to develop more empathy.

Opinion Data on race, ethnicity and language is critical to making real healthcare progress
by Vicki Veltri, Tekisha Everette and Matt McDermott.

There are significant disparities in health status based upon race, ethnicity, and other factors that deprive many Connecticut residents of an equal opportunity to enjoy good health and well-being. That some Connecticut residents live without proper treatment of illness and injury due to disparities in health care access, affordability, and outcomes based upon race, ethnicity, and language (REL) is self-evident to many but not to all.

Opinion SB 1018: Connecticut’s effort to increase prosecutorial accountability and why it will not work
by Olivia Louthen

Senate Bill 1018 does not solve Connecticut’s largest criminal justice problem: outcomes for crime victims and defendants vary based on zip codes because judicial districts operate independently of one another.

Artwork Grand guidance
by Anne:Gogh

In a world of systemic oppression aimed towards those of darker skintones – representation matters. We are more than our equity elusive environments, more than numbers in a prison and much more than victims of societal dispositions. This piece depicts a melanated young man draped in a cape ascending high above multiple forms of oppression. […]

Artwork Shea
by Anthony Valentine

Shea is a story about race and social inequalities that plague America. It is a narrative that prompts the question, “Do you know what it’s like to wake up in new skin?”

Artwork The Declaration of Human Rights
by Andres Chaparro

Through my artwork I strive to create an example of ideas that reflect my desire to raise social consciousness, and cultural awareness. Jazz music is the catalyst to all my work, and plays a major influence in each piece of work.”

Artwork ‘A thing of beauty. Destroy it forever’
by Richard DiCarlo | Derby

During times like these it’s often fun to revisit something familiar and approach things with a different slant. I have been taking some Pop culture and Art masterpieces and applying the vintage 1960’s and 70’s classic figures (Fisher Price, little people) to the make an amusing pieces. Here is my homage to Fisher -Price, Yellow […]

Twitter Feed
A Twitter List by CTMirror

Engage

  • Reflections Tickets & Sponsorships
  • Events
  • Donate
  • Newsletter Sign-Up
  • Submit to Viewpoints
  • Submit to ArtPoints
  • Economic Indicator Dashboard
  • Speaking Engagements
  • Commenting Guidelines
  • Legal Notices
  • Contact Us

About

  • About CT Mirror
  • Announcements
  • Board
  • Staff
  • Sponsors and Funders
  • Donors
  • Friends of CT Mirror
  • History
  • Financial
  • Policies
  • Strategic Plan

Opportunity

  • Advertising and Sponsorship
  • Speaking Engagements
  • Use of Photography
  • Work for Us

Go Deeper

  • Steady Habits Podcast
  • Economic Indicator Dashboard
  • Five Things

The Connecticut News Project, Inc. 1049 Asylum Avenue, Hartford, CT 06105. Phone: 860-218-6380

© Copyright 2021, The Connecticut News Project. All Rights Reserved. Website by Web Publisher PRO