Middle-class retirees: The forgotten cohort
Middle-class retirees, Baby Boomers, older Americans – whatever you want to call them – seem to be the forgotten cohort among advocates and policymakers clamoring for state tax relief for select groups.
In the past year, and even in recent weeks, attention has been trained on lower-class Connecticut residents, children, parents, hospitals and other apparently needy groups. At the same time, Gov. Ned Lamont, a private-sector guy from Greenwich, has gone to great lengths to protect the uber-wealthy from tax increases.
Yet middle-class retirees, most of whom devoted their working lives to Connecticut and paid their fair share of property taxes, income taxes, sales taxes, gas taxes, utility taxes, admission taxes, etc. have been left out of the conversation.
That’s true even though there is voluminous evidence, both anecdotal and data-driven, that when state residents reach retirement age, they’re leaving for friendlier states, particularly Florida. Obviously, some retirees are fleeing because they’ve grown weary of New England winters and crave warmer climes; others are moving to be near their grown children. People are motivated to move for all kinds of reasons.
But there can be little doubt that many Baby Boomers have departed because they no longer can afford to live comfortably in Connecticut, one of the highest-cost states in the country. It should be noted that Connecticut has the seventh-oldest population of the 50 states. So we’re not talking about handfuls of people.
It’s not hyperbolic to say that certain retirees are literally being taxed to death. The 2020 State Handbook, published by Kiplinger in November 2019, called “the Constitution State…a tax nightmare for many retirees.” Kiplinger’s compendium of tax information went on to say that the situation was getting better for some in Connecticut: those with federal adjusted gross income up to $75,000 (for single filers) and $100,000 (for couples).
The reason for their betterment is that lawmakers last year, with grudging support from Lamont, approved a multi-year phaseout of state taxes on some retirement income. Beginning July 1, 2019, the state tax on pension and annuity income was reduced by 14 percent, rising by 14 percent each year until it reaches 100 percent in 2025.
Similarly, for those same retirees, 100 percent of Social Security was exempted from state tax.
Scott Jackson, who was then state tax commissioner, referred to the recipients of the tax breaks as “the folks who made Connecticut great.”
And what about single retirees whose AGI is above $75,000 and couples whose AGI is above $100,000? Did they not help to make Connecticut great?
In effect, the legislature and governor created a “cliff” in the state’s tax structure, something they have studiously tried to avoid in the past. That is, if a couple’s AGI is $99,999, the duo is the beneficiary of significant tax savings. But if a couple’s AGI is $100,001, the couple is out of luck. They continue to get hammered every year.
Some will no doubt argue that a couple with an AGI of more than $100,000 shouldn’t complain because they’re living the Life of Riley. But let’s be real. It costs a lot to live in Connecticut. As an example, Connecticut has the fourth-highest property taxes in the country. Gas and utility taxes are among the highest as well. And let’s not forget that the 6.35 percent sales-tax base was broadened to include services that retirees use.
By comparison, New York and 36 other states don’t tax Social Security. Fourteen states don’t tax pensions. And Florida – where most Nutmeggers seem to be heading – doesn’t tax any retirement income.
Is it any wonder why aging Boomers are leaving Connecticut?
Michele Jacklin lives in Glastonbury.
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