March 2018

Revenue Options for Connecticut - 2018

Ray Noonan and Jane McNichol, J.D.

Connecticut´s prosperity depends upon smart public investments in high-quality schools, reliable roads and bridges, and adequate infrastructure. To make these investments, we need a stable, balanced, and predictable budget that raises sufficient funding without undermining economic growth or closing pathways to opportunity.

This report analyzes a wide range of possible tax changes geared towards two primary goals. First, making the overall tax system less regressive, so low-income families no longer pay a higher share of their income than wealthy residents. Second, making the overall tax system more conducive to economic growth, by simplifying and broadening the tax base to raise adequate revenue.

This research brief offers a menu of revenue alternatives, options the state can adopt to raise adequate funds through a more balanced system that supports economic growth, mobility, and inclusion. In addition,  it also addresses several structural changes necessary to respond to recent tax changes at the federal level and overbroad fiscal restrictions imposed last fall.
 

Policy Revenue Options Estimated Annual Revenue
Strengthen Connecticut’s Corporate Taxes Adopt “Throwback Rule” $18.6 million to $37.2 million
  Update Mandated Combined Reporting $25 to $40 million
  Eliminate Ineffective Business Tax Breaks To be determined
Reform Wealth and Income Taxes Increase Personal Income Tax Rate for Top Tiers $227.4 million
  Restore Capital Gains and Dividends Taxes for Top Tiers $113.7 million
  Restore Connecticut Estate Tax Exemption to $2.6 million $15.6 million in FY 2019, eventually $62.7 million
Modernize Connecticut’s Outdated Sales tax Broaden the Base of the Sales Tax $730 million to $1.5 billion
  Collect a Larger Share of Taxes Due on Internet Sales $128 million to $194 million
  Apply Sales Tax to Digital Downloads $7 million to $11 million
Improve Public Health Create a Sugary Drink Tax $102 million to $131 million
  Increase Taxes on Tobacco Products $20 million to $31.4 million

 

Issue Area:
Budget and Tax