Repub­li­cans might raise Con­necti­cut taxes, too

The Day - - REGION - This is the opin­ion of David Collins.

O ne thing clear about Repub­li­can plans for tax re­form is that time is of the essence, be­fore we vot­ers can grasp the full im­pact of changes des­tined to siphon money from the mid­dle class and fur­ther en­rich the rich­est Amer­i­cans.

Af­ter all, why slow down the first over­haul of the na­tion’s tax sys­tem in decades with dis­cus­sion, de­lib­er­a­tion, pub­lic hear­ings, facts?

If you are try­ing to rig the sys­tem in align­ment with how states voted in the last pres­i­den­tial elec­tion, pun­ish­ing blue states like Con­necti­cut, and re­ward­ing red states, you might be sure and do it fast, be­fore the next cam­paign sea­son be­gins.

Kevin B. Sul­li­van, Con­necti­cut com­mis­sioner of rev­enue ser­vices, noted in let­ters this week to Democrats in the state’s Wash­ing­ton con­gres­sional del­e­ga­tion, that Con­necti­cut res­i­dents would take it on the chin in both Se­nate and House pro­pos­als for tax re­form.

And not only might many Con­necti­cut tax­pay­ers pay more in fed­eral taxes, but tax re­form that elim­i­nates de­duc­tions for things like pay­ments to re­tire­ment ac­counts could mean those tax­pay­ers would pay more Con­necti­cut in­come tax, too.

Us­ing statis­tics about what Con­necti­cut res­i­dents re­veal in their tax fil­ings, Sul­li­van noted that, in the House re­form plan, 75 per­cent of the tax cut goes to the top 1 per­cent, who would pay, on av­er­age, 8.5 per­cent less. Oth­ers would see a small 1.2 per­cent re­duc­tion, while many Con­necti­cut tax­pay­ers will ac­tu­ally owe more.

Not too much to like there, un­less you are wealthy.

The elim­i­na­tion of the de­duc­tion for state in­come tax is worth an es­ti­mated $8.7 bil­lion to mostly mid­dle-in­come Con­necti­cut tax­pay­ers.

That rep­re­sents a lot of new fed­eral taxes, money that Con­necti­cut res­i­dents aren’t go­ing to spend here at home.

Sim­i­larly, cap­ping de­duc­tions for lo­cal prop­erty taxes at $10,000 will in­crease fed­eral taxes for a sig­nif­i­cant num­ber of Con­necti­cut tax­pay­ers who claim $4.9 bil­lion, Sul­li­van wrote.

Com­pletely elim­i­nat­ing the de­ductibil­ity of state and lo­cal taxes would cost mid­dle in­come Con­necti­cut tax­pay­ers $13.8 bil­lion, the com­mis­sioner wrote.

Cu­ri­ously, some of these pro­pos­als also could lead to Con­necti­cut res­i­dents pay­ing higher Con­necti­cut taxes, since the state’s in­come tax is based on ad­justed gross in­come as re­ported on your fed­eral re­turn.

That means if fed­eral tax re­form lim­its or elim­i­nates con­tri­bu­tions to re­tire­ment plans, for in­stance, that would raise a tax­payer’s ad­justed gross in­come, as well as the amount of tax due to Con­necti­cut.

Sul­li­van told me Tues­day that peg­ging the state tax to ad­justed gross in­come tends to be sim­pler than for­mu­las that some other states use, since those also might vary with other com­mon de­duc­tions, like lo­cal taxes.

He added that it is un­likely that the state would change its own sys­tem in light of fed­eral tax re­form, even though some tax­pay­ers, not a sig­nif­i­cantly large num­ber, may end up pay­ing a lot more to the state.

Tar­get­ing blue states for more tax pun­ish­ment in chang­ing the fed­eral tax sys­tem must not be a strat­egy that wor­ries Wash­ing­ton Repub­li­cans long term, as they rush through these changes.

But that’s not true for Con­necti­cut Repub­li­cans who need to face vot­ers here at home.

The GOP at­tack on health care for mil­lions of Amer­i­cans failed in part be­cause the im­pact reached across all states, and Repub­li­cans who needed to vote on it felt the heat.

That’s not so true with tax re­form that ge­o­graph­i­cally tar­gets North­east and West Coast states that tend to vote Demo­cratic.

Here at home, it will be nec­es­sary to re­mind all the Con­necti­cut Repub­li­can can­di­dates who want to hold state and lo­cal of­fices what their col­leagues in Wash­ing­ton have wrought.

It could be that what­ever tax re­form Congress ekes out this win­ter could be a fine ral­ly­ing cry next year, for the state’s Demo­cratic can­di­date for gov­er­nor.

It’s so in­ter­est­ing to think that, here in Con­necti­cut, Repub­li­cans may soon be the party of rais­ing taxes, un­less you’re very, very rich.

DAVID COLLINS d.collins@the­day.com

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