The recent article highlighting Connecticut’s “super rich” citizens and their effect on Connecticut’s income tax revenue was unwittingly a great example of how the state of Connecticut is unfairly grubbing more than its fair share of taxes — despite the author’s attempt to disparage the wealthy.
The AP writer, Stephen Singer, attempted to suggest how “the super-rich taxpayers in Connecticut and elsewhere shielded their income through charitable donations or other means to avoid a tax hit following the expiration of federal tax cuts” was somehow responsible for a decrease of income tax revenue in Connecticut.
Singer was incorrect when he declared his “result”: Connecticut income tax revenue plunged by nearly $281 million, more than 14 percent, compared with the same month a year before.
First, the author conflated federal tax revenue with state tax revenue, and therein lies his error. When high income earners make large charitable donations or create more capital gains from ordinary income tax to reduce their taxes, only the federal tax liability goes down. In Connecticut, like New Jersey, there is no deduction for charity, nor is there a reduced rate for capital gains either (the state taxes them as if they are ordinary). These tax policies actually translate into a windfall for state income tax revenue, because the deductions permissible at the federal level are not at the state level in Connecticut.
The only thing that could possibly explain Connecticut’s tax revenue loss would have been simply an overall reduction in income tax revenue by any and all taxpayers. Trying to suggest that the wealthiest taxpayers were somehow defrauding the state of Connecticut of potential tax income — when in essence their wealth provides an superabundance of revenue — shows both the ignorance and agenda of the author on tax policy.
What the author did properly reveal is that if the Connecticut state budget is so precariously dependent on the income tax revenue of less than 10 people — whom it must track and monitor to ensure it “gets” it income revenue — Connecticut certainly has its spending priorities severely out of whack.