In April, Connecticut lawmakers proposed a comprehensive tax cut plan that could have a significant impact on the lives of low-income residents, especially those living in neglected neighborhoods. The proposed plan includes income tax cuts for all CT residents and a three-year exemption for some residents of “high poverty” census tracts.
The tax exemption is designed to encourage more people to live in neglected neighborhoods, with the exemption applying to anyone making less than $125,000 a year (or couples making under $200,000) in parts of Bridgeport, Waterbury, New Haven, Hartford, and several other cities that have 30% or more residents living below the federal poverty level. The proposed pilot program would be funded by state bond borrowing, and as average income levels rise, census tracts would close down the program.
This proposed plan also includes the first income tax cut in nearly 30 years for all but filers considered wealthy.
While Governor Lamont agrees with targeting tax cuts to middle-class and lower-income filers, he thinks that wealthier filers should see some relief too, believing that providing relief would encourage them to stay and grow their businesses in Connecticut. The governor’s proposal allows single filers to make up to $540,000 per year (and joint filers around $1 million), and the Finance Committee budget reduces that cap to $200,000 or $400,000 for couples.
In addition to income tax cuts, lawmakers want a more substantial tax break for the working poor by including an increase in the Earned Income Tax Credit to 45% of the federal limit, while the governor’s proposal expands it to 40%. The governor’s office estimates that his proposal would completely eliminate state income taxes for anyone making less than $50,000. Both plans try to encourage employers to offer childcare by providing tax breaks to companies that add this benefit.
It’s important to note that these tax cuts won’t take effect until the 2024 tax year due to logistically difficulties. Overall, these proposed tax cuts aim to provide relief for those who need it the most and encourage economic growth in neglected neighborhoods.