February 21, 2005

Sin Taxes in Connecticut

New Connecticut Governor Jodi Rell (R) has gotten great approval ratings for the job she's done so far-- but her new budget proposal is dragging her numbers down. A new Quinnipiac poll shows Rell's approval rating dropping by 9 percent in the past month.

What accounts for this drop? For one thing, Rell wants to hike pretty much every sin tax on the books, from cigarettes to alcohol to gasoline. If the cigarette tax hike passes, Connecticut will have hit up smokers for tax hikes three times in the past five years.

More controversially, Governor Rell wants to delay a scheduled increase in the state's income tax-based credit for property taxes. That means that low- and middle-income homeowners and car owners will pay up to $150 more in property taxes.

Democrats have suggested more progressive alternatives. The "millionaire's tax" proposal, previously pushed (and then rejected) by former Governor Rowland, is among them, as is a broader "across the board" income tax increase.

But Rell's office is skeptical. From Sunday's New York Times:
A spokesman for the governor, Rich Harris, said 50 percent of state income tax revenue already comes from the state's top 10 percent of earners.''It's pretty hard to say these people aren't paying their fair share,'' Mr. Harris said.

Well actually, it's not that hard at all. Turns out that when you factor in taxes other than the personal income tax, the top 10 percent pay less of their income in tax, on average, than anyone else in the state. In fact, an ITEP analysis shows that the wealthiest 20 percent pay less than the poorest 80 percent of Connecticuters, on average.

The only way to redress this basic inequity in Connecticut's tax system is to increase the role--and the fairness-- of the personal income tax. Unfortunately, the Rell plan gets the lion's share of its revenues from regressive excise taxes. And the income tax revenues Rell proposes to raise would come primarily from the low- and middle-income taxpayers who already feel the biggest tax bite.

The One Connecticut coalition is working to promote a more equitable (and sustainable) approach to tax reform. Here's hoping the sensible reforms suggested by this group find their way into the mix before the legislative session ends in June.


At 7:01 PM, Blogger Steven Peck said...

It should not be a surprise to learn that the top 10 percent pay less of their income in tax after personal income...They have more money. Any additional tax will be a smaller percentage when compared against typical earners. This does not means that they are paying any less. It means that they have more disposable income.


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