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Report: State's Poor Pay Most, Proportionately, In Taxes

By JANICE PODSADA, Courant Staff Writer

April 15, 2008

Connecticut's wealthiest families pay less than 5 percent of their income toward state and local taxes, while the state's poor and middle-income families pay as much as 10.9 percent, according to a report issued Monday by Connecticut Voices for Children.

In 2006, the wealthiest 1 percent of Connecticut families paid just 4.7 percent of their income in state and local taxes, while the average middle-class family, which earns about $55,000 a year, paid 9.6 percent, the report said.

For the state's poorest families, earning an average of $15,100 in 2006, the proportion of their income that went toward state and local taxes rose to 10.9 percent, said the report, which based its conclusions on data provided by the national Institute on Taxation and Economic Policy.

The percentage of a family's income used to pay taxes is a common measure of tax equity, said Shelley Geballe, president of Connecticut Voices for Children, a New Haven-based child advocacy group. Under an equitable system, each tax bracket should be paying a similar proportion of income in taxes, she said.

As a struggling economy threatens to reduce funding for programs that support low- and middle-income families, a more equitable system is sorely needed, Geballe said.

However, those who oppose increasing taxes for Connecticut's wealthiest families say that upper-income taxpayers are already paying a fair share. The top 5 percent of Connecticut taxpayers have, over the years, paid more in state income taxes than the bottom 95 percent combined, according to information provided by the Office of Fiscal Analysis.

Geballe said that while that may be true, dollar-for-dollar, for lower-income households "at the end of the day what matters is that a greater a proportion of their income is going to these taxes."

Wealthy households can save or invest a portion of their earnings. "They don't spend every dollar they earn, so a smaller share of their income is taxed," Geballe said. Poor families, however, often live paycheck to paycheck.

The Voices for Children report recommended that the state:

•Increase the top state income tax bracket from 5 percent for households earning more than $250,000 a year to 6 percent for married couples earning $200,000 or more and single filers earning $100,000 or more. The change, which would affect about 7 percent of taxpayers, would generate an estimated $470 million in additional revenue, the report said.

•Adopt a state earned-income tax credit as a means of reducing the tax burden for low-income families. Personal income tax exemptions should be increased, which would help middle-income families keep pace with inflation, the group says.

•Increase the state's share of funding for public education and, by doing so, encourage cities and towns to reduce property taxes, a move that would benefit both middle-income families and small start-up businesses, the report said.

In 2003, Connecticut Voices for Children issued a similar report based on 2002 data urging tax reform. Not much has changed since then, Geballe said.

"What's consistent is that the top 20 percent of Connecticut's wealthiest families pay a smaller share of their income in state and local taxes than the other 80 percent of families," Geballe said.

The report, "Who Pays? How Our State and Local Tax System Burdens Connecticut's Poor and Middle Class," can be viewed at www.ctkidslink.org.

Reprinted with permission of the Hartford Courant. To view other stories on this topic, search the Hartford Courant Archives at http://www.courant.com/archives.
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