After hearing countless stories about how harshly Connecticut taxes its poor, state officials in 2013 committed to regularly conducting a fairness test.
But after a report the following year showed Connecticut’s poorest residents face four times the tax burden of its wealthiest, governors and legislators have repeatedly refused to look behind the curtain again.
Four times since then — and most recently last June — policymakers have postponed another so-called “tax incidence report.” The next analysis isn’t due until February 2022, and some advocates are skeptical it will happen again in this generation.
“It is just seen as irrelevant to the conversation … and that certainly is something we ought to be alarmed by,” said Rep. Josh Elliott, D-Hamden, an advocate for a biennial tax analysis and a member of the Finance, Revenue and Bonding Committee.
“We really need to know where our revenue is coming from, and from whom,” said Rep. Anne Hughes, D-Easton, co-chairwoman of the House Democratic Progressive Caucus. “Members in the [legislature] and even some of the public would rather not be reminded of this.”
“It is just seen as irrelevant to the conversation … and that certainly is something we ought to be alarmed by.”
Rep. Josh Elliott
Advocates for the study say the state’s poor could be losing ground faster than lawmakers realize if the state fails to examine tax fairness again.
“I think all families understand there are certain investments you make in order to climb the economic ladder — buying a house, investing in education,” said Yale Law School Professor Anika Singh Lemar, who teaches at the school’s community and economic development clinic. “If you’re living paycheck to paycheck, then you don’t get to make those investments.”
Connecticut first tried to identify this struggling group in 2013, when the General Assembly ordered the Department of Revenue Services to deliver the first tax incidence analysis by December 2014, and then prepare a follow-up every two years.
A tax incidence analysis studies which groups pay taxes and how those burdens are shifted. For example, renters effectively pay some or all of their landlords’ property taxes.
Gasoline distributors shift the entire cost of Connecticut’s 8.1% wholesale fuel tax onto local filling stations, which then pass it all onto motorists — who also pay a 25-cents-per-gallon retail tax.
Meg Wiehe, deputy executive director of the Institute on Taxation and Economic Policy, said Connecticut already is a land of “stagnating working-class incomes” and “extreme income and wealth inequality.”
At first glance, analysts often observe the state income tax is relatively progressive. A personal exemption and a property tax credit mean many households earning less than $35,000 per year pay little-to-no income taxes to the state.
But while the income tax is state government’s single-largest source of revenue, generating more than $9.6 billion last fiscal year, the property tax raises closer to $11 billion annually from all communities combined, according to the Connecticut Conference of Municipalities.
The property tax, as well as while the state’s second largest source of revenue — the sales tax — are “undeniably regressive,” Wiehe said at the Capitol on January 15th as part of Connecticut Voices’ annual budget forum.
“No tax legislation should be debated in the absence of the understanding of who pays. Who pays more, who pays less?”
Meg Wiehe
Institute on Taxation and Economic Policy
That means the rates for these taxes don’t vary, regardless of the income of those that must pay them. It also means Connecticut “relies much more heavily on low- and middle-income families than the state’s richest residents to generate revenue,” Wiehe said.
The 2014 incidence analysis found that Connecticut’s state-and-local tax system hammers low- and middle-income people.
The poorest people in Connecticut in terms of adjusted gross income — about 725,000 filers earning up to $48,000 per year — effectively spent 23.6% of their pay on state and local taxes in 2011.
By comparison, the middle-class paid about 13%, while the top 10% of earners paid 10% and the top 1% paid about 7.5%.
“That’s not an accident,” Hughes said. “We need to look at the numbers and ask how does that happen, and are our taxes worsening that disparity?”
According to several nationally recognized policy think-tanks, things are getting worse.
Income inequality in the United States is at its most extreme since 1928, just before the stock market crash that launched the Great Depression. And New York and Connecticut spearhead that trend, with the wealthiest 1% of households in those two states earning more than 40 times the average annual income of the bottom 99%.
More importantly, Connecticut’s poor and middle-class are increasingly swamped with credit card, medical and student loan debts that drain their resources.
Ironically, while Connecticut Democrats have been more vocal than the GOP about the overtaxation of the poor, Democrats also have been the ones keeping the tax incidence analysis on ice.
Govs. Ned Lamont and Dannel P. Malloy — both fiscally moderate on the spectrum of state Democrats — signed the bills delaying the next study. Malloy approved measures in 2015, 2016 and 2017, while Lamont signed the delay last June.
In all instances but one, Democrats controlled both the House and Senate. In 2017, the Senate was split 18-18.
Leaders routinely cite the study’s cost — which is a fraction of a fraction of the state budget — as a the reason for the repeated delays.
The cost estimate for a biennial study is $375,000, or $187,500 per year — roughly 1/1000th of 1% of the budget’s General Fund.
Rep. Jason Rojas, D-East Hartford, who co-chairs the finance committee, on one hand said the cost is “minuscule,” but also insisted the price tag is the primary reason the study keeps being delayed.
“I don’t think anybody’s afraid of the information” in the analysis, Rojas said, adding he personally favors a biennial report. And while he would compromise on a study every three years, waiting seven years is too much.
“That’s a disservice to us and to the state,” he said.
Chris McClure, the spokesman for Lamont’s budget office, said “We agree that there is value in tax incidence studies, as the report issued in December 2014 was helpful in understanding our tax landscape.”
“Unfortunately, given the copious amounts of staff time and resources that are required to complete such a study, $375,000 to update our model, we have needed to prioritize other reports, studies, and projects,” he added.
Elliott says the cost argument against regular studies is weak and allows legislators and governors not to watch — and therefore not to stop — the ongoing slide of Connecticut’s poor and middle class.
A series of biennial reports, and not just one document rapidly becoming outdated, are necessary to inform officials’ decisions each year as they craft new state budgets, he said.
“What we need to see is not just a snapshot in time, but what the trajectory of these problems are,” he said.
Connecticut Voices proposed an overhaul of state taxes in January.
The nonprofit policy think-tank proposed two major state income tax relief efforts to pump $600 million annually into Connecticut’s middle class and working poor households.
To pay for this relief, Connecticut Voices recommended higher income tax rates on those earning more than $1 million annually — including a surcharge on investment income. It also recommended freezing the state’s tax on multi-million-dollar estates, which is scheduled to shrink over the next few years.
Lamont has consistently opposed raising taxes on the wealthy. The governor, other moderate Democrats and many Republicans argue this would drive Connecticut’s highest taxpayers to leave the state.
But Wiehe said Connecticut policymakers risk flying blind if they debate tax policy without regular, updated incidence analyses.
“No tax legislation should be debated in the absence of the understanding of who pays,” Wiehe said, “Who pays more, who pays less?”
Our state mascot is Alfred E. Newman and our state motto is “What, me worry?” Connecticut likes to fly blind; better to work with little or not information than actually know what is going on or what the track record has been. Yes, the tax incidence study was frightening, revealing how deeply regressive the tax system is. But refusing to look again at this question is consistent with our general lack of interest in following up on almost anything–or even collecting and preserving relevant data to start with. A few years ago I asked a national expert on state administrative data about CT: he ranked CT among the four worst in the nation, with Mississippi. CCEA some years ago constructed a longitudinal analysis of the education-workforce path of 170,000 CT high school students–it was deeply revealing and disturbing, as it showed we lost most of our top academic performers; continuation of the analysis was quickly killed off. Much easier to fly blind!
This is a very timely, and needed news article. The Tax Policy Elephant in the room in Connecticut is “Local Property Taxes”. If one were to simply compare “Average Property Tax Burden to Average Household Income”. The results would be glaring. They would reveal the staggering tax penalty middle to low income property owners pay for “public education”, as compared to higher income state residents. Additionally, it would reveal just how small a contribution rental properties that house a large number of school age children make to fund local education. Local property taxes, or more specifically funding for local education. Is the most regressive, onerous taxation policy in this state. Some households, are commiting over 25% of their net income, while many high income households are commiting less than 5%.
Politicians waste hundreds of millions on pet projects but can’t find $375k do study how unfair taxes are on the middle class? I hope no one is buying that nonsense.
The real reason most career Democrats do not want to be reminded how unfair their TBS (tax, bond and spend) strategy has become over the last 20 years. The middle class pays far too much but that is not the full story – our overall tax burden is far to high to begin with.
Democrats don’t have enough “rich people” to tax if they start lowering taxes on the middle class and poor without major reductions in government services because those “rich people” have no intention of paying more in real hard dollars than they do now. About 500 families in Connecticut are truly rich and they skew the economic data, but they can very easily leave our state. The solution is tax reform and a massive downsizing of government services, including existing pension and benefits that are unrealistic and unsustainable compared to those that pay for them in the private sector.
“… massive downsizing of government services, including existing pension and benefits …”
How dare you suggest such a thing to our legislature & governor.
Do you really think they have the capability to figure out how to do this?
The really wealthy DO have the ability to leave, but the unknown is Will they?
Our state mascot is Alfred E. Newman and our state motto is “What, me worry?” Connecticut likes to fly blind; better to work with little or not information than actually know what is going on or what the track record has been. Yes, the tax incidence study was frightening, revealing how deeply regressive the tax system is. But refusing to look again at this question is consistent with our general lack of interest in following up on almost anything–or even collecting and preserving relevant data to start with. A few years ago I asked a national expert on state administrative data about CT: he ranked CT among the four worst in the nation, with Mississippi. CCEA some years ago constructed a longitudinal analysis of the education-workforce path of 170,000 CT high school students–it was deeply revealing and disturbing, as it showed we lost most of our top academic performers; continuation of the analysis was quickly killed off. Much easier to fly blind!
The number one reason our top academic performers leave the state is because the innovative programs that they seek aren’t offered here. In particular, STEM / Polytechnic higher education. Neither the State University system nor UCONN offer polytechnic educational centers. Our state system is woefully behind the curve in regards to innovative academic programs in tech. In fact other states with these programs are wooing our top performers with incentives and scholarships that make the idea of paying for CT university incredibly laughable.
In my personal experience, my son was wooed by universities in many other states, both public and private. After calculating the costs with scholarships offers applied at the universities my son was accepted to, the most expensive university was roughly $15K/annual (this was in 2015). UCONN offered nothing and waitlisted my son, which we laughed at because they don’t even have a polytechnic campus and the cost was roughly $30K.
In addition, it is often less expensive to go to universities in other states where out-of-state tuition is less than in-state tuition here. NY is an example.
Add to this that CT is making a minimal investment in being sure to have an accurate Census count. CT lost something north of $1 BILLION in federal funding during the 1990s because of an undercount, but we paid attention in 2000 and 2010. But not this year, even as the Census Bureau has been poorly funded and there have been clear strategies to generate an undercount. Other states have reacted aggressively: New York is investing $3 per capita to be sure to get a good count. Connecticut? A few pennies. Add to this that CT has a very weak State Data Center (the liaison office with the U.S. Census) and no systematic demographic analysis. CT likes to fly blind, even when it costs the state……. See my comment below.
Just did a 1040 tax return for a State of Georgia resident.
Social Security is exempt from Georgia Income Tax & a retirement exclusion on Pension income is allowed provided the taxpayer is 62 years of age or older.
And property taxes on a home that in CT would be about $6,000-$7,000 ish is about $2,000.
I have a house in Maine that house taxes are $1,900 that here in CT would be minimum of $6,000.
For years I voiced opinions on this CT Mirror site about CT being pile driven into the ground into bankruptcy by Politicians. Now I don’t hardly even bother reading the articles on CT finances, as why bother?? Everything I predicted, and it wasn’t brain surgery, has come true.
Folks are fleeing the state, especially obviously, all the Baby Boomers who are retiring or already retired. Go to Florida or Georgia and BOOM, you instantly save gobs of $$$ (on income taxes, property taxes, cost of living all around). But yeah Martin Looney, Joe Aresimowicz, and Bob Duff, just keep yapping that folks fleeing the state is a myth…….
The observations by Mr. Norris beg the question of why didn’t we in CT pay our obligations as they became due in terms of the state employee and teacher pensions? It seems like people wanted to educate their children here and were willing to pay the taxes for that, but upon retirement don’t want to pay the residual bills left behind and leave the state… although the low real estate prices they get when they leave must certainly take a toll on their escape plans I would think. So is our strategy to continue to borrow more now and leaving more of these bills behind for others? I have no plans to leave but may die before this problem is brought under control.
Hello Ms Richardson,
The answer is simple:Vote Buying.
There was/is a circular relationship between public sector unions and Democrat Leaders. Democrats negotiate union employee labor benefits greater than taxpayers ca afford, in return for union labor campaign contributions, and votes. Remember, every new union member, and every union wage increase. Increases total union labor dues collected that are returned to politicians as campaign funding. As stated a circular relationship..an evil one.
I have often heard what you say, Mr. Doe. But don’t our underfunded pension obligations also include a considerable amount of municipal teacher pensions that the state takes on from the towns? So what is the reasoning here beyond an unwillingness to pay the bills of other municipalities? I’ve heard this gripe for years.
So if towns are making hiring and compensation decisions and are able to transfer part of that compensation to the state, where is the incentive for control? Assuming towns are in competition for the best teachers, then the incentive is quite the opposite, to pay teachers more and pay as much of it as possible as deferred pension compensation as the state assumes it. And which town wants to be the first to reign it in? The pension obligation result: cities have a higher absolute number, and wealthier towns that can afford to pay higher teacher salaries have higher per capita numbers. Everybody has a reason to gripe.
Hello Ms Richardson,
Yes, some municipalities are overly generous. However, the Union Leaders were complicit in the underfunding of Pensions by agreeing to an unrealistic, inflated Dusciunt Rate for Pension Investment Returns. Also, state mandates do not allow municipalities to reduce school budgets, even with declining enrollment. The state and union leaders are root cause. However, municipalities are not without sin.
We didn’t come here specifically to educate kids, but was moved here for a job. My kids enjoyed the education that was paid for with my taxes. History as to why prior budgets were underfunded is nice to know but what does it matter? The simple problem is that today, revenue does not meet the obligations and CT has to constantly borrow and raise taxes. The Fed Govt nearly all corporations and other states in the 80s realized that defined benefit pensions were not sustainable. Not in CT. We just keep nodding to any employment cost as if we have no choice. 2/3 of the cost of any organization goes to employment costs. The issue is not limited to teachers and the subtleties in our state employee issues are costing us hundreds of millions. Democratic leaders nor the Gov have the guts to hit the issues head on, we haven’t hit rock bottom yet. Hence, people are speaking with their feet. You’re right, the low real estate price on exit is going to hurt, but the price is more than I paid 20 years ago. And I’ll get it back many times in tax savings. In 20 years CT will have a lot of blight.
Laurie, one reason of not funding as we went is fact that year over year over year, the Politicians in quid pro quo with Unions, gave more and more $ to the Unions in year to year just for THE YEAR TO YEAR operating expenses of annual salaries and benefits. The Union was an ever growing, ever job creating machine of inefficiencies, sucking up day to day cash flow. I did a 6 month contract with state one time. In my line of work of a Cpa, I worked with their “accountants”. They were being paid literally twice what they would be, if in private sector. Why? Year over year union raises over many years contractually, robotically.(And they worked a lot less hours for it)
We taxpayers have given aplenty. To me, it’s double taxation to say now to taxpayers, “hey, why don’t you “want to pay the residual bills left behind”” . I’m now at a point where I don’t care. And for me to say that is really something! Because for years I cared way to much, calling Legislators, writing editorials, and most importantly , trying to get folks to care.
Going up to New Hampshire this weekend to buy property. I’ll retire in 4 years and I’m not staying here, the tax on the house I’m looking at (as big as my house in the Farmington Valley) is 1/2. No sales or income tax for retirees. There are no tolls where I’m looking. They don’t seem to have the public employee issue and they aren’t trying to run a Healthcare organization in competition with the private healthcare facilities. Hmm, wonder why are costs are so high in CT?
Tell me something I don t know.living here in SC the difference for us is approx. 9 thousand dollars more in our pockets compared to living in Ct.SC if very retiree friendly compared to Ct being not! Sorry to of left Ct but glad we did!
Though the lack of documentation may make it seem that elected officials are “flying blind”, as termed in a prior post, they do know the current situation. Only the details are missing, and those don’t have much significance.
Why aggravate the public when seeking re-election?
The counter to this percent-of-income argument is the percent-of-revenues argument. Comparatively few people supply a lot of the state’s budget, and also contribute substantially to local expenditures. Losing those people would do harm, and it’s impossible to know what level of taxation would end inertia.
These ideas won’t be new to you, and that’s another reason why another report isn’t necessary.
Some folks always want to throw in comment about people “fleeing” the state and about our tax burdens. But the hard reality is that many places with high taxes and high cost of living are thriving, whether the Boston and New York metros or several metros along the West Coast or around Washington DC. They have JOB CREATION–and they are generally good jobs. CT has had very modest job creation since 2010 and the bulk of them have been low-skill, low-income jobs; our economy has been shrinking! For folks to stay in Connecticut, they need good jobs and good incomes, something CT has in general not been offering in the last decade. IF CT could get is economic act together and restore growth/quality job creation, people would be moving in, not out.
Dear Mr Fvcarstensen,
Let me speak to you as a private sector taxpayer living on a fixed income, with no current pension, and no lifetime healthcare.
Though you cannot relate, taxpayers such as myself, feel we’re being robbed by the existing terms and conditions of state union labor contracts. Benefits such as Pension Spiking, Non-indexed fixed COLAs, Lump Sum Vacation and Sick Time Accural Payouts, Lifetime Healthcare for Spouses, etc. are viewed as being excessive and unfair. We are not saying individuals such as yourself, do not deserve your pension. What we are saying, is when some state workers accrue pensions that are 1.5x, 2x or significantly greater than their lifetime base salary, or receive large lump sum sick time payouts, or receive 3% fixed COLA increases when pensions exceed $200,000.00. Something is very, very wrong with the system. Sorry, but many of us taxpayers cant sit still in this state while we feel we’re being unfairly robbed of our life’s savings. I mean no offense. I am just trying to tell you the truth.
The corporate-owned Democrats and Republicans don’t want to do the study because it will show how unfair the tax burden is to CT residents. They don’t want to be pressured to tax the rich fairly. They don’t want to face the fact that the rich are strangling poor and middle income families. And they would prefer that that strangulation continue indefinitely using the argument that the rich would leave CT if their fortunes no longer immorally protect them from paying their fair share. If the only reason the rich are remaining in CT is to suffocate the rest of us – then great is their sin. And great is the sin of the politicians who perpetuate this injustice.
The “marriage penalty” in our Income Tax Code doesn’t require an expensive “study.”
All you need to do is look here: https://www.dir.ct.gov/drs/Taxcalsched/TCS2019.htm
$32,000 CT AGI, let’s say, a $15/hour “minimum wage.” Two citizens, living together in one household, both earn it.
As two SINGLE people “shacking up” they’ll owe state income tax of $653 each, $1,306 together.
As two people MARRIED to one another they’ll owe a state income tax of $1,080 each, $2,160 together (whether they file separately or jointly).
All they need to do is remain unmarried or divorce in order to save themselves hundreds of their hard-earned dollars, each year.
Our state was among the very FIRST to recognize that people, who preferred their own sex deserved the courts to recognize when they formed into kinships of affinity, rather than depriving them of this privilege unfairly.
This official discouragement and deterrence of people
from forming themselves into families is utterly illogical.
State Assemblyman Josh Elliott, whom you quote in the article, when I discussed this with him as a concern of mine, told me it didn’t “interest” him. His opponent in this year’s election found it intriguing, though.
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Kieth,
The critical assumption in the 2014 study was that 100% of property taxes are paid by the renters, not the landlord. This presumes that being a landlord in CT in universally profitable – including the decline in property values that has ensued from spiking mill rates. Frankly, this assumption seems fallacious and with it all the conclusions on progressivity/regressivity of CT taxes.
I would whole haertedly support a new study with a careful debate of the methodology to get some real answers.