FICTION: A progressive income tax will unfairly burden the state’s wealthiest residents.
FACT: A progressive income tax will make the state’s tax system fairer. Connecticut currently has a regressive tax structure, meaning that our wealthiest residents pay a much smaller share of their income in taxes than lower income earners. Implementing a progressive income tax would help remedy this inequity.
FACT: The proposed tax will have a minimal impact even on those it affects. The proposed new tax brackets are applied only to marginal income. In other words, only the portion of a household’s income that is above $500,000 will be subject to the increased rates. For example, under the proposal a married couple filing jointly with a taxable income of $600,000 will only have to pay an additional $20 a week out of a weekly income of about $12,000.
FICTION: A progressive income tax will cause millionaires to leave the state.
FACT: Studies have shown that high income earners are the demographic least likely to move out of a state, even when changes are made to a progressive income tax.
FACT: In 2004, New Jersey raised the tax rate on those with taxable income over $500,000 a year from 6.37 percent to 8.97 percent. The number of millionaires in New Jersey actually increased in the two years after this change was enacted.
FACT: States with high income taxes often end up with more millionaires. The 15 states with the highest income tax rates have more millionaires per capita than the 15 states with the lowest tax rates.
FACT: During the 2001 recession, New York imposed a temporary progressive income tax surcharge. Instead of declining, the numbers of high income filers actually increased.
FICTION: If we implement a progressive income tax, the state’s wealthy residents will move to New York or elsewhere in New England.
FACT: Under the proposed progressive income tax, Connecticut’s wealthiest residents will still be paying less than they would in many other states. The top tax rates (married filing jointly) in surrounding states are as follows:
*Temporary one-year increase over existing top rate of 8.97 percent.
**Temporary three-year increase over existing top rate of 6.85 precent.
FICTION: If we implement a progressive income tax, the state’s wealthy residents will move to North Carolina, South Carolina, or other “destination states” in the South and Southwest.
FACT: The top income tax rates in North and South Carolina are higher than the rates under this proposal (North Carolina’s top income tax rate is 7.75 percent, and South Carolina’s top rate is 7 percent).
FACT: We are in the midst of the worst economic downturn in decades, and almost every state is raising taxes. Currently 37 states have enacted or proposed tax increases, and 11 states have increased their income tax.
FACT: Studies indicate that people more often move for quality of life issues than tax rates. Connecticut needs to maintain the quality of life that attracts people to the state- and it needs adequate revenues to do so.
FICTION: Raising taxes on the wealthy is bad for the economy.
FACT: Raising taxes on high-income earners is less harmful to the economy than further cuts. This is because such taxes will fund government services that pump money into the economy whereas the additional dollars high-income earners would be paying in taxes would otherwise likely be saved or spent out of state.*
*120 economists in New York State recently sent a letter urging Governor Paterson not to cut state programs. They explained to the governor that cutting vital programs is more economically dangerous than increasing taxes.
FICTION: Connecticut residents are opposed to a progressive income tax.
FACT: The Connecticut public agrees that a progressive income tax is necessary. A recent Quinnipiac University poll found that 71 percent of registered voters in Connecticut support raising the income tax for individuals earning more than $265,000 annually and couples earning more than $500,000 annually.
