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Who pays the most in taxes? Connecticut debates inequality and fairness as final approval of state budget is expected Wednesday.

Hartford Courant logo Hartford Courant 6/8/2021 Stephen Singer, Hartford Courant
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A year into popular anger over inequity, Connecticut’s tax system is at the center of a debate about how wealth is distributed.

One side says middle-class taxpayers and those whose incomes are less are shouldering much of the tax burden, leaving social services that have been stretched thin by COVID-19 vulnerable to spending shortfalls. Others, including Gov. Ned Lamont, say Connecticut has plenty of tax revenue at a time when the state has attracted new residents and keep others from leaving.

Sen. John Fonfara, co-chairman of the legislature’s finance committee, said the failure to raise revenue to address inequity is a missed opportunity. He’s pressing for more revenue for health care, education, urban aid, anti-poverty programs and prenatal care.

“We’re going to pass a budget that won’t address what we say it should do,” said Fonfara, a Hartford Democrat. “If the governor gets his way.”

Income tax data present only part of the picture, he said. When all taxes are accounted for — on property; sales and use; excise taxes on cigarettes, alcohol and gasoline; insurance taxes; gift taxes and other levies — the less well-off are paying a greater percentage of their incomes in taxes than are the wealthy, he said.

The two-year, $46 billion budget expected to receive final approval on Wednesday includes no significant tax increases, reflecting Lamont’s unyielding opposition to increasing taxes.

Here are more details about income taxes in Connecticut:

How big is the state’s income tax bill?

In all, Connecticut taxpayers owed $7.6 billion in income taxes in 2019, the most recent year for which data are available, according to the Department of Revenue Services.

How much do the wealthy pay?

Fewer than 4,800 top earners — those who make $2 million a year and up — were responsible for $1.7 billion, or 22% of the tax load. Each tax return from this group accounted for an average of $344,522 in revenue.

Meanwhile, residents with annual incomes of up to about $48,000 a year are paying 20.4% of their household income in taxes, according to the General Assembly’s Office of Fiscal Analysis. In contrast, taxpayers with annual incomes of $13.2 million and more are paying 6.3% of their household income in taxes.

Tax revenues are up and so is federal aid

The state’s budget surplus is projected at more than $500 million in the current fiscal year, the rainy-day fund is projected at $4.5 billion later this year and Connecticut will receive $2.7 billion in the federal coronavirus stimulus package over the next three fiscal years. The governor also says the state is benefiting from bond agency ratings upgrades that recognize Connecticut’s improving finances that would be undermined by higher taxes.

What about other taxpayers?

Those with annual incomes of between $25,000 and $100,000 a year, or 46% of all filers, accounted for 18% of the state’s total income tax bill.

Nearly 481,000 taxpayers with incomes up to $25,000 a year owed $8.5 million in taxes — a fraction of 1% of Connecticut’s entire income tax in 2019.

Worry that the rich will leave

Among the higher taxes Lamont opposed were a capital gains tax increase of more than 25% and a new consumption tax on the wealthy that Republicans said was an increase in the income tax. Gov. Lamont said raising taxes would give wealthy residents an incentive to flee Connecticut.

Fred Camillo, the Republican first selectman of Greenwich and a former state representative, criticized those who say the rich are not paying their fair share.

“For them to make statements like that is ridiculous and untrue,” he said. “But it plays well in their district.”

He praised Lamont, a fellow Greenwich resident, for holding the line on higher taxes. “You need a firewall in the governor’s office,” he said.

“The rich can pack up and leave anytime,” Camillo said. “I always worry about the middle class.”

Mark Boughton, commissioner of Revenue Services, said the legislature has made the tax code more progressive with the Earned Income Tax Credit, a benefit for low- to moderate-income taxpayers, particularly those with children.

Several hundred households pay a “significant amount of taxes,” said Boughton, the former Republican mayor of Danbury.

“In general, we have to be very careful about adding to the tax burden for all taxpayers in Connecticut,” he said. “The more you crank up taxes the people who can afford to move do so.”

Stephen Singer can be reached at ssinger@courant.com.

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