Tax Hikes A Solution to Connecticut’s Budget Woes: Child Advocate Group

An advocacy group for children in Connecticut is calling for legislators to consider a number of new tax increases in order to close a budget hole and provide more services to children.

Connecticut Voices for Children laid out a number of potential increases that include applying the sales tax to more services, raising taxes on top earners and changes to the corporate income tax.
Spending on Connecticut's children fell to a record low of 29.5 percent of General Fund spending, according to the group.

While Gov. Dannel Malloy hasn’t ruled out tax increases, he previously said he isn’t envisioning any major tax hikes.

While such cuts may offer a short-term solution, they do so at a significant cost to the long-term economic structure of the state," said Derek Thomas in the group's report.

Modernizing the sales tax to apply to more services such as haircuts, legal fees, interior design and sport lessons could bring in $730 million to $1.5 billion per year.

Connecticut Voices for Children argues that raising the tax rate a half a percentage point on the top two personal income brackets would bring in more than $283 million in new revenue while more than 82 percent of new taxes would fall on the top one percent.

It also suggests closing the carried interest loophole, which is a share of earning investment managers earn based on profits their clients make on investments. The money is considered investment income rather than wages or commissions and is therefore taxed at a lower rate.

Joining a regional compact to impose a 19 percent “carried interest fairness fee” could raise $535 million for the state while raising capital gains and dividend tax rates for the top three tax groups could raise $134 million.

On the corporate side the group is advocating for replacing the corporate income tax capital base system with a valued-added tax (VAT). It also suggests imposing a low-wage employer fee for companies that pay less than $15 an hour to their workers in order make up for public assistance funds that are given to low-income employees.

Another suggestion is to impose a sugary drink tax of one cent for each fluid ounce of soda. A 2015 proposal would’ve raised more than $85 million for 2017, but the measure wasn’t passed.

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