Connecticut Bills Could Bring Changes to Property, Income Tax Calculations

As inflation soars to 40-year highs, Connecticut lawmakers are considering a package of bills that could bring changes to the manner property and income taxes are calculated in the future.

This legislative session, the General Assembly is considering House Bill 5487, which could increase thresholds for the state’s property tax credit and eliminate some of the eligibility restrictions that are in place.

Also on the Legislature’s radar this session is House Bill 5489, which calls for inflation indexing the personal income tax, and House Bill 5490, which would establish a personal income tax deduction on rent paid, so long as the person’s primary residence is in Connecticut.

At a recent hearing on the package of bills at the state’s Joint Finance, Revenue and Bonding Committee, state Rep. Holly Cheeseman, R-East Lyme, said each one came to light because of a collaborative process.

“I’m delighted. This is one of the examples in which this is a true bipartisan proposal,” Cheeseman said. “All three of these ideas were proposed by my caucus, as well as my friends on the other side of the aisle.”

Cheeseman said she views each of the bills as high priority as inflation continues to challenge people – particularly those at or below middle-income.

“I hope this is something we can work on because as we see inflation ramping up, people, by virtue of higher wages, are going to be put in those higher tax brackets, so we have to fix this now before it gets out of hand,” Cheeseman said.

At the hearing, the committee took testimony from two representatives within the organization Connecticut Voices for Children.

Sana Shah, chief of staff with Connecticut Voices, said her organization favors all three bills. She spoke at length about HB 5489.

“Inflation indexing Connecticut’s income tax is essential to making Connecticut’s overall tax system fair for working and middle-class families,” Shah said. “Currently, inflation generates a tax increase through three key components of the state income tax.”

Patrick O’Brien, research and policy fellow with Connecticut Voices, said he views Connecticut’s current tax structure as punitive to middle-income earners.

“Working middle class families pay an unfair tax burden,” O’Brien said. “The majority of that tax burden, especially for working families, comes from the property tax. We think that an increase in reformed tax credit is especially important.”

With inflation in the mix, O’Brien said, “It’s really making it a pretty severe problem for middle-income families.”

At the committee hearing, which was held March 25, state Sen. John Fonfara, D-Hartford, said he agreed with “inequities” in Connecticut’s tax structure, but also shined a spotlight on a bigger part of the state’s economy and the various factors that come into play.

“I very much would like to see a better balance of not only addressing the inequity of our tax structure, but also how we can grow the economy so that more people that you advocate for, and I represent, will have an opportunity to share in the wealth of this state,” Fonfara said, directing his remarks to O’Brien.

To that end, O’Brien said he agreed with the sentiment.

“If you create a fair tax system, you’ve lowered the burden for working-class families,” O’Brien said. “That puts more money in their pockets. They tend to spend that money quickly in the state. We think that good tax policy is essentially good economic policy.”