The “Voices” think tank targets the tax code
A New Haven-based think tank on Tuesday proposed three solutions for a regressive tax system that disproportionately weighs on working and middle-class families: higher tax rates for the highest incomes, new taxes on capital gains and mansions; and a tax on property and expanded labor income. credits.
These suggested solutions are all included in a new report released by the Connecticut Voices for Children think tank.
The 79-page report is titled “Advancing Economic Justice Through Tax Reform.” It was released on Tuesday, when it was also the main topic of discussion at CT Voices’ 20th Annual Budget Forum, held online through Zoom.
“These are unprecedented times with big problems, and big problems require big solutions,” said CT Voices Executive Director Emily Byrne of the current confluence of the Covid-19 public health crisis , the economic closure induced by the pandemic and the current national balance sheet with systemic racism.
“To oppose tax reform because it includes tax increases on the rich is to support the current disproportionate burden on working and middle class families,” said Patrick O’Brien, researcher and policy researcher from CT Voices, who was the lead author of the report. . At such a hard time income inequality, in state and nationally, he said, advocating for the economic status quo “is much more radical” than pushing for a relatively modest redistribution of wealth.
Click on here to read the full report.
Report: Tax reform can tackle “economic injustice”
O Brien’s report and presentation on Tuesday described rising income inequality in the United States and Connecticut in recent years, an even wider racial wealth gap and the direct relationship between “economic injustice.” and the material struggles of families who represent 90% of the population. range of income.
“In particular, it limits the ability of many families to ensure that they have high quality health care, child care, food and clothing,” the report read. “This limits the ability of many families to buy homes or rent apartments in safe neighborhoods of their choice with well-funded public schools. This limits the ability of many families to provide the emotional and developmental support needed by children with high needs. This limits the ability of many families to support their children in career and academic success without the burden of excessive debt. And this limits the ability of many families to ensure that future generations have more opportunities than previous ones. “
Citing a comprehensive 2014 study by the State Department of Tax Services (DRS), O’Brien reported that Connecticut’s lowest income decile (who earn less than $ 53,418 per year) pay a rate effective tax rate of 23.62%, while the state’s highest income deciles ($ 14.7 million and above) pay an effective tax rate of 6.28%.
As one of the event’s featured speakers, New Haven State Senator and President of the Senate, Pro Tem Martin Looney (see below), said at the forum: “Low-income people pay. a lot of taxes. They may not pay state income taxes, but they pay a disproportionate share of state sales taxes. They pay a disproportionate share of property taxes.
The central point of O Brien’s presentation and report was how to change the state’s tax structure to address this current imbalance.
The report is full of suggestions. Here are a few :
• Increase the current top tax rate of 6.99% on income over $ 500,000 for single filers ($ 1 million for joint filers) to 7.99%, and create a new tax bracket. 8.49% millionaire income tax on income over $ 1 million for single filers ($ 2 million for joint filers). Estimated annual increase in state tax rolls: $ 504 million.
• Follow the New York model and increase the current top tax rate from 6.99% to 8.97%, and create a millionaire tax bracket of 12.696%. Estimated annual gain: $ 1.72 billion.
• Lower the inheritance and gift tax exemption to $ 5 million, increase the maximum tax rate to 14%, and move the payment ceiling away from $ 15 million. Estimated annual increase: $ 108 million.
• Establish a 1 percentage point surtax for investment income on the portion of income over $ 500,000 for single filers ($ 1 million for joint filers). Estimated annual increase: $ 167 million.
• Establish a statewide 1% property tax on the portion of the market value of each home in excess of $ 1.5 million. Increase this tax rate to 1.5 percent on the portion exceeding $ 2 million. Estimated annual increase in revenue: $ 449 million.
• Increase the Connecticut earned income tax credit to 40 percent. Estimated annual cost: $ 82 million, or $ 102 million if you include immigrants who pay and file taxes with an Individual Tax Identification Number (ITIN)
• Increase the maximum Connecticut property tax credit to $ 500 and make it refundable, double the income threshold, restore tax eligibility for non-elderly and childless people, and extend the credit to tenants. Estimated annual cost: $ 585 million.
“Opponents of these tax policies will attack them like a tax hike,” O’Brien said. “We are proposing tax reform, which includes raising taxes on the rich to reduce a disproportionate tax burden on working and middle class families.” It’s not just about raising taxes to increase government spending, he said.
Looney: the progressive “struggle continues”
Yale political science professor Jacob Hacker gave the forum’s opening address on focusing as much on political power as on fiscal changes in order to achieve a fairer society. Looney (pictured, with clock awarded to him by CT Voices) spoke about the progressive policies he and his state legislative colleagues have been able to adopt over the past three decades.
In 1991, while Looney was still in the state House of Representatives, Connecticut implemented its first state income tax. At that time, income tax was fixed and applied the same rate to all employees, he said. “Unfortunately, the State Senate at the time did not have enough Democratic votes to pass a progressive income tax.”
And so the Democrats in the state legislatures pushed and pushed for the change. The first breakthrough came in 2009, he said, “when we established the first differential rate by increasing the maximum rate to 6.5%. “
This budget debate went on all summer, he said, and a deal was finally made with former Republican Gov. Jodi Rell. The budget passed exclusively with Democratic votes, and Rell let it become law without his signature.
Under the leadership of a Democratic governor, Dannel Malloy, the legislature was able to pass and enact further progressive changes to the income tax structure in 2011 and 2015, he said.
“This struggle continues. “
Aside from struggles against income tax, the state legislature was able to pass a bill in 2011 that provided for eligibility for tuition in the state for undocumented immigrants. In 2012, state Democrats successfully lobbied for the death penalty to be repealed.
And in 2019, the state legislature passed an increase in the minimum wage along with a bill for paid family and medical leave.
“There are important ways to make our tax structure even more progressive,” he said.
For example, by imposing a separate tax on very high income from capital gains, dividends and interest. Or by increasing the maximum rate of income tax.
Democrats have firm control over the state legislature, with qualified majorities in both the Senate and the House.
Thinking back to decades of progressive advocacy in Hartford, Looney noted another essential characteristic that Democrats in the state legislature need to push through the type of agenda described by CT Voices.
“Having a Democratic governor aligned with the legislature makes all the difference when trying to adopt a progressive policy,” he said.
The current governor of the state, Ned Lamont, is a Democrat. And, so far in his first term in his office, has proven reluctant to embrace any kind of major progressive tax reform.