Connecticut is the wealthiest state in the richest nation in human history, but our state budgets have been plagued by deficits in recent years.
How can this be?
Over the past 30 years, the way people make and spend money has changed, but Connecticut’s tax code has failed to keep up. This has greatly benefited wealthy residents with a large number of investments, for which increases in value (known as capital gains) are not captured by Connecticut’s income tax. Large Corporations have benefited from a host of tricks to avoid paying taxes in Connecticut and many have also intentionally underpaid their workers, leaving them to depend on the social safety net to make ends meet, straining state resources. Online retailers have also benefited from our outdated tax structure as many online sales are not captured by Connecticut’s sales tax, putting traditional stores at a disadvantage and depriving the state of important revenue. As our laws have failed to keep up, the middle and working classes are being crushed by a tax code trying to squeeze every last cent out of an outdated model.
We hear a lot about how the wealthy will flee if we try to make much-needed changes to Connecticut’s tax code. Don’t believe it. In 2015, the last time Connecticut made an adjustment to the top tax rate from 6.7% to 6.9%, the number of millionaires(+) grew from 11,090 in 2014 to 11,223 in 2015. And these figures actually underestimate the growing number of wealthy individuals in the state because of the capital gains loophole.
Connecticut does not count capital gains on investments as income.
Chances are if you are very wealthy, you have a lot of investments in stocks, real-estate, businesses, and other ventures. The money gained from these investments are not counted as income under Connecticut’s tax law. That’s a huge problem because wealthy individuals have gotten wise to this loophole and moved more money into categories Connecticut doesn’t tax. You might be tempted to say “good for them, they beat the system,” but those lost tax dollars are resulting in long-term damage to our cities and towns, our education system, and prevent our worn out roads and bridges from being repaired.
Large corporations are taking advantage of our state’s tax code and social safety net
Another huge problem Connecticut faces is bad actor businesses paying their workers poverty wages. These are large corporations that make billions in profits, then turn around and pay their workers so poorly that they are forced to depend on social services like food stamps in order to survive. This is just plain wrong, but our tax code does not penalize these bad actors.
Meanwhile, the business lobby is attacking workers’ wages, benefits, and workplace protections
Business groups funded by the biggest beneficiaries of our state’s tax system have spent millions of dollars lobbying politicians not to correct our structural problems, keeping money in their pockets, and attacking the wages, benefits, and rights of primarily of unionized workers, but in doing so have lowered standards and undermined wages and benefits for all workers, deepening our troubles. As wages have stagnated and benefits become less generous, families across our state are falling farther behind. This has to stop.
Fortunately, there is a way out, but it requires the political will by decision makers.
1.) Connecticut desperately needs to update its tax code to reflect the changes of the last 30 years.
2.) Connecticut must stop undermining worker wages and benefits in the name of fiscal austerity, and increase workers’ ability to negotiate better wages and benefits for themselves, because doing so will lift standards for all workers in our labor market, leading to greater spending in our economy.
3.) We must hold bad corporate actors accountable.
Take 2 minutes, and click this link to email your legislator right now.
Tell them Connecticut needs to update its tax code so that we aren’t being taken advantage of.