Promises made, promises kept
You’ve heard it before; Connecticut is an expensive place to call home. For the thousands of retirees in our state, this is especially true as retirement income has been subject to taxation. As a result, many have leftformoretax friendly states such as Florida.
In 2017, the General Assembly passed PA 172, the 20182019 Budget. Included in this budget was a Republican proposal which expanded the income tax exemption for pension, Social Security and annuity earnings to individuals making less than (<) $75,000 and joint filers making < $100,000. Previous limits were < $50,000 for individuals and < $60,000 for couples.
The budget passed with strong bipartisan support.
The exemption is a sixyear phaseout beginning this year where qualified residents can deduct up to 14 percent from these income sources if they fall below the thresholds. The deduction will increase to 28 percent 2020, 42 percent in 2021, 56 percent in 2022, 70 percent in 2023, 84 percent in 2024, and 100 percent in 2025.
While there was talk of delaying these benefits in the new budget, I’m please Gov. Ned Lamont and the Democratic legislative leaders have chosen to honor the most recent bipartisan budget by moving forward with these reforms.
Our relatives, friends and neighbors who have established roots, raised their families, worked or run a business in Connecticut should not be forced to move out of state during their retirement years. Increasing the income threshold was the right thing to do.
Although these reforms were honored, the 20202021 budget also goes in a tax increase direction adding about $1.75 billion in new taxes over the biennium while increasing state expenditures by 5.3 percent over the same period. We will now pay more on dry cleaning, interior design services, Netflix, Uber/Lyft rides, prepared meals, soda and alcoholic beverages, safety apparel, passthrough business entities, and a surcharge on home sales worth $2.5 million or more.
Although the cost of living in Connecticut seems fated to rise, we hope this bipartisan tax reform on Social Security, pensions and annuities will provide some relief so our retirees may retire in the state they have always called home.