Thursday, April 2, 2009

Progressive Income Tax Applauded

Better Choices for Connecticut applauded the Connecticut General Assembly’s Finance, Revenue and Bonding Committee today for releasing a revenue package that begins to reform the state’s imbalanced revenue system. “This is a giant step in the right direction,” said Maggie Adair, Policy Director of Connecticut Association for Human Services and co-chair of Better Choices for Connecticut. “We commend the Legislature for taking a realistic approach to the state budget gap. By proposing a progressive income tax, not only are they helping to alleviate some of the most devastating cuts called for by Governor Rell in February, but they are also addressing a fundamentally unfair aspect of Connecticut’s tax structure.” The revenue increases are critical to a budget that strives to preserve key provisions in the areas of health care, education, and human services.

The Finance, Revenue and Bonding Committee released a proposal that includes a progressive income tax that will raise rates on the state’s wealthiest earners. The proposal calls for increasing the tax rate to 6% on taxable income for married couples earning more than $250,000, 7% on income greater than $500,000, 7.5% on income greater than $750,000, and 7.95% on income greater than $1 million. Currently the tax rate on married couples earning more than $20,000 is 5%. Connecticut's middle-income and lower-income families pay much more of their income in state and local taxes than do the wealthiest families. After federal tax deductions, the wealthiest 1% of Connecticut's families pay 4.7% of their income in state and local taxes. This is less than half the share of income paid in these taxes by the state's middle-income families (10.2%) or low-income families (10.9%). Better Choices for Connecticut noted that Governor Rell proposed an increase in the income tax in 2007 and urged her to adopt the current proposal.

The Finance Committee also proposed a rollback of the property tax credit. While Better Choices for Connecticut acknowledges the need for shared sacrifice, there are better choices available to us, including adoption of mandatory combined reporting, and paring back on a variety of tax expenditures such as the film tax credit. "There are additional, sensible options for increasing revenues that should be on the table," said Douglas Hall, Acting Managing Director at Connecticut Voices for Children. "Fixing our revenue problem with revenue solutions will avoid the economic and human damage that budget cuts will cause." Specifically, the coalition urges adoption of revenue proposals that were not part of the Finance Committee’s proposal:

· Close corporate tax loopholes. Flaws in our tax code – “loopholes” – enable many large and profitable corporations to avoid paying their fair share and shift the responsibility for taxes onto in-state businesses and individuals. For example, many multi-state corporations exploit flaws in the tax code that allow them to artificially shift profits to their subsidiaries in other states and avoid paying taxes. Closing these loopholes through “combined reporting” – as at least 22 other states do – would mean that companies could not use creative accounting to shield themselves from taxes.

· Increase the sales tax by one percentage point. Connecticut can also limit any harmful effects of this increase by creating a state earned income tax credit to help working families and a small business property tax credit.

· Scale back public subsidies to the entertainment industry. In Fiscal Year 2009, the state will lose an estimated $117.5 million in revenues to the television and film industry through film tax credits. These subsidies far surpass our public investment in any other industry or business activity through tax credits. There is currently no cap on how much revenue Connecticut can lose through these subsidies.

· Increase alcohol taxes. Increasing alcohol taxes will not only raise revenue, it will discourage excessive alcohol consumption, thereby reducing long-term health costs.

Better Choices for Connecticut is a community coalition working to help Connecticut make better choices on ways to improve the state’s imbalanced revenue system so that it advances opportunity for shared prosperity for all Connecticut residents; preserves services for children, families and the elderly; creates and sustains good jobs; and reinvests in the middle class and our communities. For more information, go to

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