As Tax Day approaches and state policymakers debate proposals to address the state’s major revenue gap, a statewide coalition proposed that income taxes be raised above the Governor’s proposed level for higher-income residents and, in exchange, that the state’s property tax credit be maintained. Better Choices for Connecticut, a broad-based community coalition of non-profit organizations, community groups, labor and faith based organizations, contends that there is room to increase taxes for wealthy residents in order to close the revenue gap and reduce the impact of tax increases and budget cuts on middle- and lower-income residents. State and national policy experts and researchers at the news conference disputed concerns that tax increases might drive wealthy residents from the state, presenting evidence from newly-released research studies:
- A study by the Political Economy Research Institute at the University of Massachusetts finds that the impact of taxes on cross-state migration is very weak. Other factors – primarily employment and family concerns – provide the main reasons that families move. The report, The Impact of Taxes on Migration in New England, concludes that family ties, comfort with the community, jobs, the costs of moving, and valuing public services in the state are the reasons families stay put, regardless of their state’s tax rates.
- While casting doubt on the impact of taxes on decisions to move, another study by Connecticut Voices for Children finds that large differences in property taxes among wealthy suburbs in Connecticut and New York give the Governor much more room to raise income taxes on the wealthy without exceeding overall New York state tax rates. The study found that property taxes in wealthy New York suburbs on homes for sale over $3 million dollars ranged from 69% to 232% higher than in Greenwich, and from 36% to 115% higher than in New Canaan. The study found that for someone with $1.7 million in taxable income in Greenwich, the difference in property taxes from Purchase, New York can be the equivalent of 2% in additional income tax.
“That taxes are not a big driver of migration may shock some politicians, but is not a surprise to researchers on this issue,” said Professor Jeffrey Thompson, author of the migration report and research economist at the Political Economy Research Institute at the University of Massachusetts, Amherst. “People concerned about attracting people to a state and keeping them there should really focus on creating jobs, and even be willing to raise taxes to do it. People are not going to leave a state because of some modest change in taxes, but they will leave if public safety deteriorates and if there are no jobs.”
“If you raise state income taxes for the wealthiest people, the overwhelming majority will stay, and you will get significant new resources to meet growing public needs,” said Jon Shure, Deputy Director of the State Fiscal Project at the Center on Budget and Policy Priorities. “Tax policy should be made by debating public needs and how to meet them, not through fear tactics and false assertions.”
The coalition also raised concerns about Connecticut’s imbalanced and regressive state and local tax system. According to an analysis by the Institute on Taxation and Economic Policy, the wealthiest Connecticut residents pay less than half the percentage of their income in state and local taxes than do most other residents. After federal deductions for state and local taxes, Connecticut's low- and middle-income families pay close to 10% or more of their incomes in state and local taxes, while the top 1% of income earners pay just under 5%. Thus, increasing income tax rates on high-income residents would begin to restore balance to the tax system, according to the coalition.
“Residents of all income levels benefit from the education, health, job training, public safety, and environmental protection services that our taxes fund,” said Jamey Bell, Executive Director of Connecticut Voices for Children. “We all have a stake in protecting these services and a more progressive income tax can help close our budget deficit while minimizing damage to our state’s economy.”
Research reports and briefs released at the news conference:
- The Impact of Taxes on Migration in New England. Political Economy Research Institute, UMASS Amherst.
- Connecticut's Taxes Are Competitive With Tri-State Neighbors. CT Voices for Children.
- The Road Not Taken: Debunking Migration Myths. Center on Budget and Policy Priorities.
Other Related Issue Briefs:
- Making Connecticut's Income Tax More Progressive. Connecticut Voices for Children.
- Connecticut's Wealthy Pay Smaller Share of Income Than Most Residents in State and Local Taxes. Connecticut Voices for Children.
- Connecticut State Revenues: An Analysis of the Governor's FY 2012 Revenue Proposals. Connecticut Voices for Children.
- Better Choices for CT revenue plan
Better Choices for Connecticut is a broad-based community coalition that supports a balanced and equitable revenue system that reflects the priorities and values of the state’s residents.
