HARTFORD, CT—Admitting they have no idea how they are going to pay for it, Senate and House Democrats said Thursday that they want to exempt Social Security income from Connecticut’s income tax.
The exemption will cost the state an estimated $45 million in revenue, but it will have other benefits and make Connecticut more attractive to retirees, Democratic lawmakers said Thursday at a Legislative Office Building press conference.
Senate President Martin Looney, D-New Haven, joked that when the state is done with the “Still Revolutionary” slogan they can change it to “Connecticut, a great place to live and a great place to die.”
Looney also has a proposal to bring the Connecticut estate tax in line with the federal estate tax.
Connecticut is only one of 13 states that doesn’t exempt all Social Security income from the income tax. Currently, 75 percent of Social Security income is exempt.
Most states, including Connecticut’s neighbors like Massachusetts, New York, and New Jersey already exempt these benefits from state income taxes.
House Speaker Joe Aresimowicz, D-Berlin, said he’s optimistic the legislation will pass with broad bipartisan support since Republican lawmakers have proposed similar legislation.
“I think it’s very clear that the time has come to allow our seniors to keep more of their money,” Aresimowicz said.
He said it’s more difficult to provide direct property tax relief.
Democratic Gov. Dannel P. Malloy’s budget proposal would seek to eliminate the property tax credit for households making less than $100,000. It’s one of the few tax breaks left for the middle class.
Democrats have until the end of April to figure out whether they want to keep that part of Malloy’s budget proposal. They will also have to grapple with including this proposal to exempt Social Security benefits from the income tax as part of the overall budget package.
It’s likely if it’s part of an overall budget package, Republicans will be less likely to vote for it because it will be part of a larger bill. But Aresimowcz said they haven’t made a decision yet about whether to run it as a stand alone bill or include it in the budget.
He said they’ve acknowledged that this is a Republican idea that they’ve embraced.
Aresimowicz anticipated questions about how they can give up any revenue when they’re facing a $1.7 billion budget deficit. He said he thinks exempting Social Security benefits will have a “positive economic effect,” because those seniors will be spending that money on goods and services in the state.
Aresimowicz said they are still debating on whether to include a “means test” and whether they should phase in the exemption over time to help absorb the impact of the revenue loss to the state.
“We want people to stay in Connecticut and we acknowledge that it’s not going to be 82 degrees and sunny every day like it is in Florida,” House Majority Leader Matt Ritter, D-Hartford, said.
He said they’re trying to get more people to stay here when they retire and inevitably those retirees will spend more money in the state and help boost the economy.
Sen. John Fonfara, D-Hartford, said it’s not just a smart political decision, but one that makes Connecticut more attractive.
“We can’t stop doing policy decisions that are good for Connecticut,” Fonfara said.
The Finance, Revenue, and Bonding Committee will hold a public hearing on the legislation today.
Sen. Cathy Osten, D-Sprague, who co-chairs the Appropriations Committee, said she plans to help find the revenue by “trimming expenses all across the board” in order to make this legislation happen.
“This is an important piece of policy,” Osten said. “That has been a long-time in the making and that we all heard about as we were door knocking.”