High Taxes Hurt

Taxes are a fact of life. When we pay taxes, we’re supporting our roads, our schools, and other important government services. However, when taxes are too high they hurt, especially those who can least afford it. Connecticut’s tax system is out of balance. A better balance would reduce the cost of living, increase pay, and generate opportunities.

We are also witnessing the result of what happens when high taxes push people to move out of the state – everyone else has to pay more.

The latest Yankee Institute policy brief shows that if the top 357 taxpayers left the state, everyone else’s income tax bill would need to go up 13 percent.  It also shows how the state could have – by keeping one taxpayer from leaving – paid for the entire budget of the Division of Criminal Justice.

Connecticut has lost $8.8 billion of taxable income to other states since 1993 after accounting for people moving in. That amounts to a loss of about $400 million in revenue for the current year.

The policy study looks at the cost of high taxes and suggests how Connecticut can do better. Gov. Malloy and the General Assembly should:

• Adopt a sustainable budget under the spending cap.
• Avoid tax increases and await the Tax Review Committee’s recommendation before adopting comprehensive reform.
• Use the Earned Income Tax Credit to help those most in need, paying for the increase by eliminating less effective spending.

The painful consequences of high taxes are clear in the Department of Revenue Services study on tax incidence in Connecticut. The study shows that low-income residents feel a disproportionate share of the pain caused by Connecticut’s tax system. According to DRS, the losses due to taxes for half of Connecticut households equal 23 percent of income.

“It’s become a cliché to complain about the high cost of living in Connecticut. Rather than complaining, let’s insist that the governor and legislature cut taxes to make life in our state a little more affordable,” said Carol Platt Liebau, president of the Yankee Institute. “It’s time to reverse the trend of losing taxpayers who pay enough to fund an entire function of government when, instead, we should be working to attract them.”

“At an absolute minimum, we must avoid further tax increases – which only make hardworking residents reach for their wallets and then head for the exits,” Liebau said.