While Gov. Ned Lamont is proposing some modest income tax rate cuts for middle and lower income taxpayers, it is also the right time that both he and the legislature need to focus on enhancing tax exemptions on retiree income.
Specifically, we see three actions that need to be taken:
1. Raise the income qualification level for joint tax filers from a current ceiling of $100,000 to $150,000. Since the current single filer’s qualification level is $75,000, this change would provide a much more balanced relationship between the two filers, which we already see in multiple federal and state tax rate schedules and standard deductions.
2. Fix the “Cliff” problem, where those retirees whose income is even just one dollar more than the qualification level cut-off will receive zero tax exemption relief, a very unfair situation that can cost a taxpayer several thousand dollars.
3. For traditional IRA distributions to qualified tax payers, accelerate the schedule for tax exemption from the current 25% per year roll-out ending in 2026, to 100% this tax year, similar to what was done last year for pensions and annuities.
These actions would support our main strategy–keep seniors in Connecticut!
Gordon Mackenzie of Fairfield belongs to Fairfield Senior Advocates.