The Register Citizen (Torrington, CT)
Gap between rich and poor could widen in Connecticut
Connecticut has just begun a sevenyear program to ease the tax burden on its elderly, a process that will provide nearly $170 million in annual relief by 2025.
But much of that relief is targeted at seniors with pensions and annuities — benefits that are increasingly less common for lowand middleincome residents, particularly minorities.
At the same time, lawmakers have chipped away at other tax credits for the poor and middle class and imposed new burdens on this income group, such as the sales tax surcharge on prepared meals and a fee on plastic bags.
It appears that in their push to make Connecticut a more attractive place to retire, lawmakers also inadvertently worsened the inequality gap in a state already known for its extremes of income wealth.
“We seem to be schizophrenic about this,” said University of Connecticut economist Fred Carstensen. “All of this tax stuff in Connecticut is done in
silos. It just amazes me there is no coordination. You don’t move to Florida just because you’re going to pay somewhat less in state taxes down there.”
Carstensen said these policy choices likely will push more Connecticut residents toward poverty than lead additional seniors to financial comfort. But legislators said they did their best in tough fiscal times as they tried not to overburden the most vulnerable while simultaneously addressing an issue many officials fear: the exodus of Connecticut retirees.
“We’re trying to strike a delicate balance and meet two goals that are both a priority,” said Rep. Jason Rojas, DEast Hartford, cochairman of the legislature’s taxwriting finance committee.
“I don’t think we look at things holistically very often, but the idea was to entice those who work here to retire here,” said Senate Minority Leader Len Fasa
no, RNorth Haven. “If they’re staying here, they’re buying groceries here, going to stores here and paying taxes here.”
Regardless of whether legislative policymaking is schizophrenic, lawmakers rarely find bipartisan unity when it comes to tax laws.
But after a ninemonthlong battle to craft a new, state budget in 2017, Democrats and Republicans united in November of that year to adopt a twoyear plan.
After years of deficits and a sluggish recovery from the last recession, Connecticut finally was seeing signs of economic growth and rising tax receipts in the state’s coffers.
And one of the few things both parties insisted upon in that plan was tax relief for the elderly.
Longplanned state income tax breaks for retired military personnel and teachers went forward as planned, but the primary relief for seniors was aimed at Social Security, pension and annuity income.
Connecticut already had exempted Social Security from the state income tax if
a retiree’s total annual income was less than $50,000, or if a retired couple’s was less than $60,000. And taxpayers with incomes greater than these limits receive a 75 percent exemption.
Starting with tax returns filed this year, these limits were raised to $75,000 and $100,000, respectively.
The second tax break, which would go into effect between 2019 and 2025, would phase out state income taxes on pensions and annuities for retirees with overall income less than $75,000, and for couples with less than $100,000.
By 2025, according to state analysts, elderly residents who qualify for these breaks will save a collective $166 million per year.
And if these income limits of $75,000 and $100,000 seem modest, consider this: The average Social Security benefit in Connecticut is about $1,550 per month or roughly $18,600 per year.
And, according to the Pension Rights Center, the median pension in 2016 for adults over age 65 was $9,262 for those who retired from the private sector and $17,576 for those who worked in state and local government.
Providing tax relief for retirees earning more than $75,000 per year generally targets either those with significant retirement benefits. or those who must still work to make ends meet.
Connecticut is hardly alone in its passage of tax policies that favor wealthy seniors.
An analysis released this past summer by the Center on Budget and Policy Priorities, a Washington, D.C.based fiscal thinktank, warned that states, in general, send a “large share” of their elderlyfocused tax breaks to highincome seniors who need them the least.