State budget must prioritize racial equity, middle class

As we mourn the many losses from COVID-19, and after navigating the challenges of the past year, we now find ourselves at a crossroads as we decide how best to recover economically and rebuild our daily lives.

America was inequitable in so many ways before the pandemic began, and those injustices have only deepened since. As the Black Lives Matter movement was unfurling across Connecticut in 2020, state Senate Democrats led in outlining a “Juneteenth Agenda” to tackle longstanding racial and socio-economic inequities in our state. In this legislative session, we are committed to evaluating public policy initiatives through the lenses of racial equity and social justice, and of protecting the middle class.

To that end, it’s imperative that we craft a budget that is fair to middle income families while also addressing social justice. The central principle is simple: those who make more should contribute more.

Not only is burdening Connecticut’s middle class unjust, but it will also hinder our efforts to recover from the economic stresses that the pandemic has wrought. According to the Economic Policy Institute, “taxing the rich, who spend the smallest share of their income, puts the least downward pressure on demand in state economies. The net effect on demand is strongly positive if these tax revenues are used to support state spending.”

It’s also vital to note that the pandemic has had a disproportionate impact on people of color. Reforming Connecticut’s tax policy is one way to begin addressing inequity and closing the racial wealth gap that has plagued Black and brown communities across our state for generations. According to a study by the Brookings Institution, “high and progressive taxation of extreme wealth is in itself a strategy for racial justice because it would directly reduce the portion of the racial wealth gap that exists at the top of the economic ladder.”

One way to enhance fairness is to adjust taxes on capital gains since the wealthiest derive most of their income from capital gains rather than a weekly paycheck. The stark reality is that for those earning under $100,000 a year, less than 10 percent of that income is derived from capital gains while those over $2 million have 80 percent of their income in capital gains. An additional 1 percent surcharge tax on the capital gains of millionaires will allow Connecticut to invest in social programs, education, and support for cities and towns. As you know, this pandemic has seen the wealthiest grow even richer, leaving the rest of us behind. Main Street — not Wall Street — needs our help.

Connecticut should also increase income tax rates on its highest income earners while remaining competitive with states in our region. New York is poised to increase tax rates on multimillionaires from 8.82 percent to 9.65 percent, with even higher rates on those making $25 million or more a year. By contrast, married couples in Connecticut making $1 million or more every year pay a maximum of just 6.99 percent. A shift to 7.99 percent for joint filers making over $5 million and 8.99% for those making over $25 million is reasonable.

Also, imposing an additional 1 mill state property tax on homes with a market value over $700,000, with a 1.5 mill tax on the portion of value over $1.4 million and 2 mills on the portion of value over $2.2 million is one way of ensuring the vast real estate wealth in Connecticut that was built up over decades of restrictive zoning and housing regulations can contribute to the health and vibrancy of all 169 cities and towns in the state, and not just to a lucky few. These tax policy changes will enable us to restore the property tax credit on the state income tax and the state Earned Income Tax Credit for the working poor to pre-FY 2018 levels, fund an equitable, tiered structure for Payment In Lieu of Taxes on private college and hospital property for needy communities, and begin the phase in of a state child tax credit.

At the same time, we must avoid funding new initiatives with regressive taxes or user fees which burden low- and moderate-income families while leaving the wealthiest relatively unscathed.

We have endured much from this viral pandemic. Looking forward we must keep in mind the economic burdens shouldered by our middle class, and the racist and intolerable burdens endured for centuries by our Black and brown communities. Equity will be at the heart of our modernized state tax policy. Now is the time to act.