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Gov. Ned Lamont wants to save middle-income households $440 million annually starting next year by ordering the first state income tax cut since the mid-1990s.
The administration estimates roughly 1.1 million of Connecticut’s 1.7 million income tax-paying households will benefit from his plan, which aims to revise a complex state income tax system at the points that affect most households.
While many Americans pay just one income tax rate on their non-investment earnings, Connecticut residents pay blended rates when they file their state tax returns.
The state income tax has seven different rates — from 3% to 6.99% — each assigned to a different income range.
For example, a couple with an adjusted gross income of $250,000 currently pays 3% on the first $20,000, 5% on the next $80,000, 5.5% on the next $100,000, and 6% on the final $50,000 that they’ve earned.
The governor wants to reduce the first rate — which also applies to the first $10,000 earned by single filers — from 3% to 2%. He also wants to lower the next rate — which covers earnings between $10,001 and $50,000 for singles and between $20,001 and $100,000 for couples — from 5% to 4.5%.
The administration estimates that many middle-class joint filers would save about $600 per year with the proposed cuts and many middle-class single filers would save about $300. If enacted by the legislature, it would affect paycheck withholding starting in January 2024.
Read more: Income tax cut in CT? Lamont plan could save middle class $440M