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1 Kailee Tkacz & Mark Robyn, Connecticut Governor Malloy Proposes Multifaceted Tax Plan 1 (2011)

handle is hein.taxfoundation/ffcgdxz0001 and id is 1 raw text is: TAX :DATtO.. .. ....,.......... i ..... \ ..... . .... - :..g.. . ....-.... Marc! 14,2011 No. 263 Connecticut Governor Malloy Proposes Multifaceted Tax Plan By Kailee Tkacz and Mark Robyn Facing a $3.2 billion deficit, newly elected Connecticut Governor Dannel Malloy (D) recently proposed a FY 2012 budget that would increase taxes by $1.5 billion, cut spending by $758 million and reduce public employee costs by $1 billion.' The budget proposes many tax changes, including a fairly broad income tax increase, an increase in the general sales tax rate from 6% to 6.25%, an expansion of the sales tax to some currently exempt items, and increased excise taxes. The tax increases would raise about $425 per person in Connecticut. In this study we examine many of the proposed tax changes and find that some are advancements toward sound tax policy while others are steps in the wrong direction. Individual Income Tax The most substantial proposal in the governor's budget is the income tax increase. As shown in Table 1, the current income tax rates are flat for earners between $10,000 and $500,000 in taxable income, with a higher 6.5% rate for those earning over $500,000, which was enacted in 2009. Table 1: Present Income Tax Rates, Single Filers Rate . Bracket ,3.0% >$0 5.00% $10,000 6 5% >$500,000 A shown in Table 2, the governor's FY 2012 budget proposal would add five new tax brackets to the current three and increase marginal tax rates for anyone with taxable income over $50,000 ($100,000 for couples). The income tax increases, totaling $495 million in fiscal 2012, would be retroactive to January 1, 2011, even if the budget is not approved by the legislature until June or July. Transparency and stability are key principles for good tax policy, and retroactive tax increases violate these principles. Taxpayers should know the tax rates on their income when it is eared and not have to face higher rates after the fact. I Connecticut has a two-year budget window. Unless otherwise noted, the revenue estimates in this document apply to FY 2012. See 2012-2013 Connecticut Governor's Budget, http://www.governor.ct.gov/malloy/cwp/view.asp?a= 11&Q=473940>, accessed February 21, 2011.

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