Why is Tax Freedom so Late in Connecticut?

Connecticut has one of the latest “Tax Freedom” days in the country. How late? 45 other states recognize their tax freedom before Connecticut does. What is tax freedom? It’s a benchmark to indicate when the collective residents of a state have paid off all their tax obligations and begin to profit for themselves.

This year, Connecticut recognized its tax freedom at the end of last month, on April 25. In comparison, Alaska recognized its tax freedom a full month prior, all the way back on March 25. While these two states are quite different, it’s worrisome to realize the stark difference between tax burdens.

According to the Tax Foundation, 12.8% of all of Connecticut’s income goes back to the government. This is the second-highest state and local tax burden in the entire country. Only the State of New York boasts a higher percentage, at 14.1%.

How does this translate to the current legislative session? Data clearly shows that Connecticut has had, and continues to have, an extremely aggressive tax structure. The pandemic has added financial pressure to every household budget. When we convened the current session, all legislators agreed that the focus of the upcoming months should solely be on helping residents and businesses get back on their feet.

The events that have transpired over the last few weeks do not support the notion of safely re-opening the state. Legislative Democrats recently put forth their initial budget package, which is balanced on $1.9 billion in new fees and taxes. These taxes range from digital advertising, a cost that would assuredly be passed on to and paid by the consumer, to a convenience fee when making debit/credit card transactions. The Budget Reserve Fund is flush with a $3 billion surplus, and Washington approved the American Rescue Plan, which will infuse money into our schools, health programs, and much more.

On top of the new taxes presented in the legislative budget package, there are other proposals on the table that would increase our cost of living. Outside of the budget document, legislation implementing the Transportation & Climate Initiative (TCI) will create a new gas tax to fund green initiatives. The plan is contingent on the participation of states from all across the Northeast. As of now, Connecticut is only joined by three other territories – not enough to make a substantial impact on reducing the regional carbon footprint.

Consequently, this superfluous tax could be as much as 26 cents per gallon, a cost that will add up quick over time and impact many other industries. If the new gas tax is approved, then we are looking at higher price tags on clothes and necessary groceries.

What comes next? Budget negotiations are ongoing, and I am working hard to fight against any proposal that would make living in Connecticut more expensive. Asking working- and middle-class residents to pay more, considering the pandemic and the state’s financial surplus, is counterintuitive to getting our economy running again.

I supported a new law that requires the governor to consult with the legislature before releasing COVID-relief dollars, restoring your voice to the decision-making table. I also urged that the state consider tax relief on municipal real estate and personal property taxes to give businesses a little more time to make payments. This relief was realized when Gov. Lamont signed an order allowing cities and towns to collect taxes 90-days later than the initial filing deadline.

I look forward to more opportunities, like the ones I just outlined, to govern with the majority party in Hartford. I will continue to update you on the progress of the state budget, which must be voted on before Wednesday, June 9. Should you have any questions about our state government or would like to speak with me about an issue, I can be reached at Patrick.callahan@housegop.ct.gov.

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