In This Together CT

http://www.theday.com/re.aspx?re=0aee53fa-7509-40ff-bcc3-6a6e87130072

Published on 5/31/2009
By Jamey Bell and Douglas Hall

Within weeks, Connecticut will enter a new budget year, yet state legislators and the governor have not agreed on a budget plan and the state’s fiscal problems continue to mount.

Guided by a bipartisan commitment to adopt an adequate and balanced state budget, Connecticut’s elected officials can and must take dramatic steps to ensure the state fulfills its responsibilities and confronts this fiscal crisis.

A fundamental part of this solution is to respond to Connecticut’s severe revenue problems in a responsible manner. Connecticut’s revenue system is failing to provide the funds needed to support the most basic public structures that help maintain quality of life – our schools, transportation systems, public safety programs and environmental protection efforts.

Our unfair tax system contributes to these revenue problems. After federal tax deductions, Connecticut’s wealthiest families only pay about 4.5 percent of their income in state and local taxes, compared to 9.3 percent for middle-income families and 12.1 percent for low-income families. In other words, middle-income and low-income people pay more than twice the share of their income in state and local taxes than high-income residents do.

Why do wealthy families escape paying their fair share? The underlying problem is Connecticut’s income tax rates are not progressive enough to offset the regressive nature of the sales and property taxes. Indeed, most Connecticut residents (61 percent) pay the same 5 percent income-tax rate as the wealthiest millionaires.

As policy makers contemplate the impact of severe state budget cuts that will certainly harm many Connecticut families, they must, at the very least, take action to make sure that Connecticut’s wealthiest residents are contributing their fair share toward the most vital functions of state government.

The solution is a more progressive income tax. Adopting higher income tax rates for married couples who earn more than $250,000 (and individuals who earn more than $132,500), as proposed by the legislature’s Finance Committee, would raise an estimated $1.226 billion in additional revenue to close the budget deficit, while affecting less than 7 percent of Connecticut taxpayers.

Even under this proposal, income tax rates on Connecticut’s wealthiest residents would still be lower than the rates in most neighboring states. Of the 41 states with income taxes, only seven have a lower marginal rate for the wealthy than Connecticut.

And even with this rate increase, the share of income paid in state and local taxes by Connecticut’s wealthiest 5 percent would still remain smaller than what is paid by the “bottom” 95 percent of families. That is, this change would only begin to make the state and local tax system less regressive.

In the long term, a progressive income tax could help to reduce the state’s over-reliance on regressive property taxes, creating additional revenues in more prosperous years that could be used to more fully fund education at the state level.

Connecticut residents of all income levels benefit from public programs and services, like our public schools and universities, roads and sidewalks, parks, playgrounds, libraries, police and fire-fighting services, environmental and public health protections, courts and prisons. We have a responsibility to support and maintain these things together, through taxes. We all have a stake in ensuring that we have the revenues we need to protect the services that help make our state a great place in which to live and work.

The fiscal problems facing Connecticut are truly historic in nature. There are no simple solutions, but among the variety of options that should be part of the budget package is a fairer and more progressive income tax.

Jamey Bell is executive director and Douglas Hall is director of operations and research at Connecticut Voices for Children (www.ctkidslink.org).

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