The state of Connecticut is facing a budget deficit of ($2.8 billion for Fiscal Year 2018, which began July 1, 2017. Proposals for filling that gap include: concessions worth $1.5 billion from the largest public employee union; weakening the Earned Income Tax Credit and other tax credits that benefit lower-income taxpayers; and sharply reducing funding for early education and higher education.
Each .5% tax rate increase on incomes over $250,000 (i.e., the top 5% of households) would result in new revenue of $217 million to help fill the gap. Below is the letter they wrote. [Note: if you are in the top 5% and would like to sign on, please contact project director Mike Lapham at: [email protected]. If you are not in Connecticut but are in the top 5% by wealth or income, please consider joining Responsible Wealth.]
We are upper-income Connecticut residents who treasure the quality of life in Connecticut and care deeply about the state’s future. We are concerned about the projected $2.8 billion budget gap for the current fiscal year, and we are willing and able to pay more taxes as part of the solution to filling that gap going forward.
Some combination of budget cuts and increased revenue must be found to balance Connecticut’s budget. We believe that many of the ideas currently being considered would unnecessarily harm our most vulnerable citizens.
While some budget cuts are necessary, we call for a balanced solution that includes an increase in taxes for those of us in the top 5% (with incomes of $250,000 and above), combined with targeted, responsible cuts in spending.
Raising the sales tax is a regressive approach to raising revenue, and affects lower-income households most. Weakening the earned income tax credit, as some have proposed, puts additional strain on our lower-income families. Cuts to health care, child care and other services that disproportionately affect low-income children and families end up costing the state more in the long term. We cannot afford to, and morally should not, short-change these children who are our state’s future.
While revenues may be down, the state’s revenues tend to rise and fall with capital gains. It would be irresponsible to cut important long-term investments in education, health, services, infrastructure, job training, etc. due to a short-term revenue shortfall.
Those of us in the top 5% can afford to pay more. While many in our state are struggling economically, those of us at the top have done quite well in the past decades. 84% of all income gains between 1979 to 2012 went to the top 1%, who now have the highest income of any state, alongside a greater share of income than in any
other state. Meanwhile, the top marginal tax rate in Connecticut sits at 6.99%, below neighboring New York State (8.82%), and soon to be below Massachusetts’ likely 9.1% rate.
Opponents of raising top tax rates point to high-profile cases of millionaires leaving the state, purportedly due to the tax rate, but numerous studies have shown that upper-income migration due to taxes represents a very small fraction of moves, and is far outweighed by the increased revenue that would result from a tax increase. The same proportion of upper-income households move from no-tax New Hampshire to Florida as move from Connecticut to Florida. We are not about to pack up and leave because we are asked to pay a bit more on our state taxes.
Every .5% increase in tax rates on the top 5% of earners in Connecticut (incomes over $250,000) would bring in $217 million in additional revenue. Raising the top two marginal rates (currently 6.9% and 6.99%) by 2% in Connecticut would bring in an estimated $868 million per year, closing a significant portion of the $2.8 billion budget gap, and helping to avoid harmful budget cuts and revenue increases elsewhere that fall disproportionately on our needier citizens.
We can afford to pay more and should. We are willing to be part of the solution.
David Bechtel, Hamden
Courtney Bourns, West Hartford
Evan Cowles, Farmington
Franklin and Shannon Demarest, Higganum
and Scott Schoem, MD, West Hartford
Tracy Hewat, Salisbury
Robert Nixon, Old Greenwich
Martha Peterson, Hamden
Charlie Pillsbury, New Haven
Harry Schmidt, Cromwell