State tops in fed­eral tax im­bal­ance

Leads coun­try in get­ting the least back

Hartford Courant - - Front Page - By Christo­pher Keat­ing

HART­FORD – Con­necti­cut is ranked first in the na­tion for pay­ing the most in fed­eral in­come taxes and get­ting the least fed­eral dol­lars in re­turn.

That’s the find­ing of the lat­est sur­vey by the New York-based Rock­e­feller In­sti­tute of Gov­ern­ment.

Con­necti­cut leads all states be­cause it re­ceives only 74 cents back for ev­ery dol­lar that res­i­dents pay in fed­eral taxes. As one of only 10 states that pays more in fed­eral taxes than it re­ceives, Con­necti­cut is known as a so-called “donor state’’ that es­sen­tially helps other states that re­ceive more than they send to Wash­ing­ton, D.C. The state re­ceives rel­a­tively lit­tle money back from the fed­eral gov­ern­ment in pub­lic ed­u­ca­tion grants and Med­i­caid, among oth­ers, as Fair­field County mil­lion­aires and bil­lion­aires pay large amounts of fed­eral taxes.

State of­fi­cials now fear that the sit­u­a­tion could get even worse be­cause the 2017 fed­eral tax law that was signed by Pres­i­dent Don­ald Trump in­cludes pro­vi­sions for cap­ping the de­duc­tion

for state and lo­cal taxes at $10,000 per cou­ple - mak­ing many Con­necti­cut res­i­dents pay even more in fed­eral taxes in a tax in­crease largely on the rich.

“New fed­eral tax changes will now worsen this dis­par­ity and likely have long-term con­se­quences for states like Con­necti­cut, im­pair­ing the abil­ity of Con­necti­cut state and lo­cal gov­ern­ments to af­ford es­sen­tial in­vest­ments in in­fra­struc­ture, ed­u­ca­tion and work­force train­ing that are nec­es­sary to drive eco­nomic growth,’’ said Comp­trol­ler Kevin Lembo. “These fed­eral tax changes raise basic ques­tions of fair­ness for high-in­come states like Con­necti­cut and fly in the face of the tax bill’s stated goals.”

Gover­nors in North­east­ern states like Con­necti­cut, New York and New Jersey say the $10,000per-cou­ple cap on de­duc­tions dis­pro­por­tion­ately af­fects home­own­ers in high-tax states. Many Fair­field County home­own­ers pay more than $10,000 an­nu­ally in real es­tate taxes alone.

Al­though many Con­necti­cut tax­pay­ers do not item­ize their fed­eral de­duc­tions, the av­er­age state and lo­cal tax de­duc­tion over­all in 2015 was $19,664, ac­cord­ing to the leg­is­la­ture’s non­par­ti­san re­search of­fice. Among those earn­ing more than $1 mil­lion per year, the de­duc­tions are among the high­est in the na­tion at nearly $330,000.

Con­necti­cut tax­pay­ers earn­ing be­tween $75,000 and $100,000 per year would pay ad­di­tional taxes, on av­er­age, of only $19 per year un­der the Trump tax law, the re­search of­fice said. But those earn­ing more than $1 mil­lion per year would pay an ad­di­tional $118,000 per year, boost­ing the over­all av­er­age.

Con­necti­cut was tied with New Jersey in 2015 for the sec­ond­high­est per­cent­age of tax­pay­ers claim­ing the de­duc­tion — at 41 per­cent of fed­eral tax re­turns.

The “donor’’ states in­clude Mas­sachusetts, New Hamp­shire, Illi­nois, Colorado, Ne­braska, North Dakota and Wash­ing­ton state. As a small state, Con­necti­cut re­ceived the least bang for the buck on a per capita ba­sis.

Lembo tweeted, “Dear Florida, Texas, Ken­tucky, Ten­nessee, Alabama, Ohio, the Caroli­nas, and 32 other states, you’re wel­come. Love, Con­necti­cut.’’

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