Connecticut families could see their federal tax rates increase by an average of nearly $3,400 if the Tax Cuts and Jobs Act (TCJA), also known as the ‘Trump Tax Cuts,’ are not extended by Congress.
According to Americans for Prosperity (AFP), a national policy organization promoting free market and limited government, state businesses would also be hit with an average tax hike of $1,973; worse, estimates predict the Connecticut economy stands to lose 14,000 jobs if the TCJA lapses.
“Skyrocketing inflation fueled by reckless government spending has put a huge strain on family budgets,” AFP stated on its website. “By keeping the 2017 tax cuts, we can better help hard-working Americans make ends meet.”
Implemented in 2017, the tax cuts are set to expire by year’s end. Currently, President Donald Trump and congressional leaders are negotiating the passage of a “big, beautiful” bill that will make the TCJA permanent.
Nevertheless, despite Republicans controlling the House of Representatives and Senate, the TCJA’s extension is not certain, with Democrats and several Republicans lobbing criticisms at the bill. Democrats argue the tax cuts disproportionately benefit the wealthiest Americans, threaten federal programs like Medicare and Medicaid — on which millions of citizens depend — and would balloon the deficit, slashing revenue by $4 trillion from 2025-2034 if made permanent. Some Republicans, meanwhile, hesitate to deepen the deficit without major federal spending cuts to offset the loss revenue.
Critics also question the TCJA’s economic impact. The Economic Policy Institute states that extending the tax cuts would “cause more damage to working families and the U.S. economy,” while the Institute on Taxation and Economic Policy (ITEP) suggests only the “richest 5 percent of Americans” will have taxes lowered, while “all other income groups” would be hit with an increase.
However, institutions like the Tax Foundation and Tax Policy Center say otherwise, finding that every income bracket would see tax relief.
Still, the TCJA has a proven track record. Prior to the pandemic, the tax cuts helped boost U.S. economic growth, adding 5 million new jobs, while the unemployment rate fell to 3.5%, the lowest since 1969. Additionally, a family of four saved $1,500 per year, the median income reached an all-time high, and 870,000 Americans received an immediate bonus of $1,000 or more.
Since January 2021, however, inflation has taken a significant toll on households nationwide, driven by the Biden Administration’s spending that not only added $5 trillion to $36 trillion national debt, but eroded the value of the U.S. dollar, with overall prices rising 19.4%. In Connecticut, the average household has spent $33,219 more due to inflation, according to the Joint Economic Committee (JEC).
Nationally, if the TCJA is made permanent, the Congressional Budget Office (CBO) projects that the gross domestic product (GDP) will be $12 trillion higher than expected and private investment is estimated to exceed pre-TCJA projections by $4 trillion. Additionally, according to the Tax Foundation, extending the TCJA would “boost long-run economic output” by creating 847,000 full-time jobs.
For Connecticut, TCJA’s expiration would exacerbate one of the worst tax climates in the country.
Recently, the state has been ranked among the worst states to start a business with the third-highest property taxes in the United States, as reported by WalletHub. Worse, Connecticut has the highest electricity costs in the country, according to LendingTree. Indeed, higher taxes have led to an exodus of not only corporations — like General Electric, Aetna and Alexion — but also a net loss of more than 21,000 people between April 1, 2020, and July 1, 2023.
Yet, in this legislative session, the General Assembly has been considering funding new programs like universal pre-K. Further complicating matters, with fewer federal funds flow into the state, lawmakers are “scrambling” to find ways to preserve programs that “affect infectious disease management, genetic screening of newborns and substance abuse prevention,” as reported by CT Mirror.
Indeed, earlier this year, Connecticut already counteracted reduced federal aid, allocating nearly $3 million in “emergency” funding for programs such LGBTQ organizations, illegal immigration services, and Planned Parenthood, which received $800,000.
With increased state spending on the horizon, residents must brace for possible state tax increases. To fund these new ventures, Gov. Ned Lamont and lawmakers have proposed busting the 2017 bipartisan ‘fiscal guardrails.’ These reforms — that include caps on spending, revenue, and volatility caps, plus a bond lock — have saved the state $170 million annually in pension debt payments and, if kept intact, could save $7 billion over 25 years.
Despite warranted concerns about deficits, unrestrained government spending is the main culprit behind rising national debt, not tax cuts. Letting the TCJA expire, therefore, would be devastating, shrinking the economy, reducing revenue potential, and leaving families and businesses worse off. Congress, especially the Connecticut delegation, should extend the ‘Trump Tax Cuts’ to alleviate the financial burden of state residents and ensure prosperity for them.
