August 2014

Building a Modern Revenue System to Restore Investments in Kids

A sound state revenue system must be adequate, fair, and accountable. Connecticut must do better on each of these measures if it is to make the strategic public investments in young people essential to Connecticut’s success in the 21st century economy.

Over the past two decades, the share of the state budget committed to kids has fallen from nearly 40% to about 30%. Connecticut is lagging in preparing our children to thrive in the tough global economy, and to be strong parents and good citizens themselves.

Our current revenue system falls short of generating the resources needed to maintain vital public structures such as education and healthcare. Connecticut has faced deficits from Fiscal Year (FY) 2009 through FY 2018.  Our system is not only inadequate but also unfair: the richest 1% of residents pay half the proportion of income in state and local taxes that the poorest 20% do; meanwhile, Connecticut is one of only two states that make no adjustment in their income taxes for the cost of raising children.

Reforms to Connecticut’s state and local revenue system can make it more adequate, fair, and accountable by aiming to achieve the following five goals:

  • Reduce Connecticut’s overreliance on the local property tax to fund public education, diminishing discrepancies among towns and offering property tax relief to residents and businesses.
  • Increase the adequacy and reduce the regressivity of the state’s revenue system by counteracting the erosion of our tax base, avoiding regressive sales and property tax increases, and strengthening the state’s Rainy Day Fund to build a cushion of revenues to help weather the next downtown.
  • Make Connecticut’s tax system more family friendly by creating a Child Tax Credit that accounts for the high cost of raising children and brings Connecticut in line with most states and the federal government with fairer tax treatment for families raising children.
  • Continue posting additional years and categories of tax subsidy data on Connecticut’s new online database, allowing citizens, advocates, and the media to scrutinize how public dollars are put to use in supporting the state’s businesses.
  • Refine the state’s new, biennial tax incidence analysis once it is released, ensuring that subsequent versions of the analysis are even more useful to reformers and policymakers.
Issue Area:
Budget and Tax