HARTFORD, CT — Patrick O’Brien, a research and policy fellow at CT Voices for Children, said Wednesday that the most pressing tax issue in Connecticut “is not the overall tax burden, but rather the distribution of that burden.”
However, defining that burden has been difficult due to the dearth of data.
The last tax incidence report from the Connecticut Department of Revenue Services, was released in 2014 and it was based on data from 2011. That was former Gov. Dannel P. Malloy’s first year in office.
The report measures progressivity or regressivity of each of the taxes and offers guidance to policymakers.
In 2015, the report which showed the tax burden on every income level in Connecticut, was delayed to February 2017 and biennially thereafter; in 2016, it was delayed to February 2018 and biennially thereafter; in 2017, it was delayed to February 2020 and biennially thereafter; and in 2019, it was delayed to February 2022.
That 2022 report, if it’s not delayed, would be based on data from 2017, which is the last year of the Malloy administration.
The biennial report is currently mandated to cover “the overall incidence of the income tax, sales and excise taxes, the corporation business tax and property tax,” even though the first report covered nine categories.
“Without further delay, the DRS could publish a tax incidence report during the first half of all even numbered years,” O’Brien wrote in his report on reforming Connecticut’s tax system. “It is essential that the General Assembly and the public have a comprehensive assessment of the tax system as well as sufficient time to develop tax proposals for the long legislative session during odd-numbered years.”
The first report showed all but two taxes—the personal income tax, and the estate and gift tax—are regressive, O’Brien said.
He said based on state Comptroller Kevin Lembo’s annual report for 2019 there are 13 major taxes and CT Voices for Children believes each should be included in a DRS report.
With fewer taxes included in the report O’Brien fears that it will make Connecticut’s tax system look less regressive than it actually is.
“It is essential that the General Assembly and the public have a comprehensive assessment of the tax system, as well as sufficient time to develop proposals for the long legislative session,” O’Brien said.
Rep. Jason Rojas, co-chair of the Finance, Revenue, and Bonding Committee which sets tax policy in Connecticut, said he would like to have the data too.
“It’s always important to have up-to-date data on how our tax policies impact individuals and households,” Rojas said. He added that it’s equally important to see how “tax incidence impacts business decisions and the ability to encourage investment and growth in CT.”
O’Brien said increasing transparency regarding tax burden is to “prevent future tax increases on the working and middle class and is necessary to support further efforts of reforming Connecticut’s regressive taxes.”
The last tax incidence report showed that about 725,200 taxpayers with an average adjusted gross income $48,948 per year had an overall tax rate of about 23.6 percent in 2011, and about 15,050 taxpayers with an adjusted gross income of between $600,000 to $2 million per year paid a tax rate of about 7.69 percent.
The CT Voices for Children report released Wednesday at their annual budget forum also called for increasing the personal income tax rate on those earning more than $5 million a year from 6.99% to 8.49%.
In addition it called for raising taxes on multi-million-dollar estates in the top 5 percent of the wealth distribution and increasing tax credits for working- and middle-class families.