May 24, 2019

Capital Gains Tax Could Help to Reduce Inequality and Boost Opportunity

Connecticut faces a deficit of about $3 billion over the next two years. Without adequate revenues, budget cuts could threaten the education, health, and child care funding vital to expanding opportunities for the state’s children and families. In addition, Connecticut’s upside-down tax system contributes to growing inequality in the state. The wealthiest 20 percent of taxpayers pay a smaller share of their income on state and local taxes than the lowest 20 percent.

As part of its state revenue proposal, the General Assembly’s Finance Committee has proposed a two percent surcharge on capital gains for taxpayers with income over $500,000 for single filers and $1 million for married filers.  The Center on Budget and Policy Priorities highlighted proposals in Connecticut and other states that are considering raising capital gains taxes. Their analysis finds that:

  • Because wealth is highly concentrated, so is capital gains income. Nationally, 69 percent of capital gains go to the wealthiest one percent of taxpayers.
  • While opponents argue that strengthening capital gains taxes discourages investment and stifles economic growth, research evidence indicates that there is no connection between capital gains tax rates and economic growth.

Capital Gains Go to Wealthy Families

Connecticut Voices for Children’s recent revenue proposals recommended a broader capital gains and qualified dividends tax on the top two personal income tax brackets. As we discussed in our fact sheet, wealthy Connecticut residents would still enjoy a huge net tax reduction, even with a new state capital gains tax. More than half (56 percent) of the federal Trump tax cuts will go to the wealthiest five percent of Connecticut taxpayers, who will pay $2 billion less in personal income, corporate, and estate taxes in 2019. The top one percent of taxpayers in the state will enjoy an average federal tax cut of nearly $60,000.

Please let the Governor and your state legislators know that you support state revenue proposals that help to fix our state budget deficit, reduce inequality, and expand opportunities for children and families by asking the wealthy to pay more!

Issue Area:
Budget and Tax