Christine Stuart photo
Sen. Scott Frantz, R-Greenwich (Christine Stuart photo)

Twenty-two individuals told a state tax panel Wednesday what changes they would like to see made to Connecticut’s tax system.

Eliminating the corporate income tax, cutting the estate tax by increasing the asset threshold, making the income tax more progressive, and eliminating tax exemptions were just some of the suggestions made by individuals who attended the hearing at the Legislative Office Building.

Former Sen. William Nickerson, who co-chairs the committee, said what he heard from members of the public Wednesday was that the current tax system is not sustainable.

He said they all had different complaints and different ways of solving the problem, but the one thing they had in common was the sentiment that the “status quo is unsustainable.”

He said there was an acknowledgment that taxes do have an impact. He said the current administration pointed out that Connecticut had the slowest Gross State Product growth in the nation between 2013 and 2014.

“The current path is unsustainable. We cannot maintain the Connecticut economy at the lowest rate of growth,” Nickerson said following Wednesday’s public hearing.

Christine Stuart photo
Former Sen. William Nickerson and former Rep. Bill Dyson, co-chair the Tax Panel (Christine Stuart photo)

Now the panel will spend the next four months figuring out how to realign the state’s tax code to find a way out of “our economic doldrums,” Nickerson said.

Daniel Johnson, a tax attorney at Cummings and Lockwood, said the best way to move forward would be to look at the recent changes to the estate and gift taxes.

The recently passed 2016-17 state budget eliminates all funding to the probate court system, a total of $32 million over two years. In order to make up for the loss, Gov. Dannel P. Malloy and lawmakers eliminated the $12,500 cap on probate court fees and doubled the fee on estates worth more than $2 million.

Johnson said it was the last straw for some of his clients because, in conjunction with the Connecticut estate tax regime, “it’s going to persuade families to change their residency to Florida or another tax friendly jurisdiction.”

He said his firm has memos instructing their clients on how to change their residency and has opened a Florida office to continue to serve these clients.

Johnson said an estate and gift tax regime may be a fairly predictable source of revenue for the state, but it doesn’t show how much income tax the state is losing because these individuals and families are changing their residency.

Christine Stuart photo
Suzanne Bates, policy director for the Yankee Institute for Public Policy, testifies with executive director Carol Platt Liebau (Christine Stuart photo)

Suzanne Bates, policy director at the Yankee Institute for Public Policy, also suggested eliminating the gift and estate tax, because of the loss of income tax revenue. She said based on IRS information from 2011 to 2012, the state lost $2 billion in taxable income.

The conservative think-tank also suggested eliminating the property tax on motor vehicles and the corporate income tax. Bates said by eliminating the corporate income tax it would make a loud statement about where the state stands when it comes to its business environment.

She said the sales tax brings in about $500 million per percentage point, so increasing the sales tax by one percentage point could pay for the elimination of the corporate income tax.

On the other side, Ellen Shemitz, executive director of Connecticut Voices for Children, suggested the best way to do that is to modernize the sales tax base, make the income tax more progressive by raising rates on high-income earners, and improve the oversight of the state’s $7 billion in tax exemptions.

“We have to make sure every individual is asked to pay their fair share,” Shemitz said.

She said she doesn’t believe the data exists to prove wealthy individuals are leaving Connecticut because of its tax structure.