HARTFORD, CT — The Democrat-controlled Finance, Revenue, and Bonding Committee is ignoring Democratic Gov. Ned Lamont and proposing a bill that would impose an additional 2% capital gains tax on Connecticut’s wealthiest residents.
The bill, which is scheduled for a public hearing next Friday, will impose the additional tax on income derived from capital gains on single filers who earn more than $500,000 and couples with income over $1 million. Currently capital gains are taxed for this income bracket at 6.99 %.
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The proposal has support from the Democratic majorities in the House and the Senate, but Lamont and Republican lawmakers are not in favor.
“I don’t think it’s good policy,” Lamont said Thursday in an interview at the Legislative Office Building. “For 25 years we’ve said we’re going to tax capital gains, dividends and interest income at the same rate. This would break sort of a 25-year tradition.”
He said Connecticut’s rate is higher than the rate in Massachusetts, but lower than New York’s.
“I understand where the sentiment is but I want to give people a reason to stay,” Lamont said.
Rep. Jason Rojas, who co-chairs the Finance, Revenue, and Bonding Committee, said they are trying to find an overall balance to the budget.
Connecticut is facing a $1.5 billion deficit next year, and more than $2 billion in the following year.
“We have a deadline to balance a budget and there were concerns about what the governor proposed in terms of where the burden falls,” Rojas said.
He said he’s not vilifying the wealthy but the top tax bracket benefitted the most from federal tax cuts and “can help contribute toward balancing the budget.”
House Minority Leader Themis Klarides, R-Derby, said a capital gains tax and the “mansion tax” being talked about by Senate President Martin Looney is only going to incentivize rich people to leave Connecticut.
Klarides said they have to consider what’s going to happen if they end up going through with it.
She said based on historical data taxpayers are going to leave because they have the means to do it.
According to IRS data, those who moved out of Connecticut from 2015 to 2016 took with them more than $6 billion in adjusted gross income, or AGI. People who moved to Connecticut brought with them only about $3.36 billion in AGI. The total net loss to Connecticut: $2.7 billion.
The states that poached the most taxpayers from Connecticut were New York (8,202 tax returns) and Florida (7,944).
She said the only reason the Democratic Party held the line on tax increases in 2017 and 2018 was because they needed Republican support to pass a budget.
“They won’t face reality unless they are forced to,” Klarides said.