A few weeks ago I came across an article reporting the most and least tax-friendly states for retirees. Some of the most tax-friendly states for retirees included, Alaska, Delaware, Georgia and Nevada. Connecticut made the list too; unfortunately it was on the least tax-friendly state list.
According to a recent study, Connecticut is the second least tax-friendly state for retirees in the country. What’s even more unfortunate is that this probably doesn’t surprise most of you.
States treat income differently including; Social Security, assets, earnings and pensions. This means that individuals, once they retire, often evaluate their living expenses and decide which tax structure and location fits best with their retirement plans and goals.
As legislators there are proactive steps we can take to keep our valued retirees here in Connecticut.
- Exempt Social Security Income from the Personal Income Tax
Connecticut is currently one of only 13 states that taxes social security benefits, which is one of the most vital sources of income for many retirees. Exempting social security income from the personal income tax would keep more money in the pockets of our retirees.
It is time for the state to realize that we have an aging population – by 2032, 25 percent of the state’s population is projected to be over the age of 65. We need to begin to put policies in place that support our aging population. This is one of those policies.
- Phase in an Exemption from the Personal Income Tax for Pension Income
Our seniors find it hard enough to make ends meet in Connecticut – they see their taxes continually rising and even though taxes and expenses continually increase pension income stays the same. Phasing in an exemption from the personal income tax for pension income would decrease the migration of retirees. Other states offer tax breaks to seniors, Connecticut must start to look to ways to keep retirees here and that starts with offering them tax breaks on their hard earned pensions.
We can’t change our weather – but we can change our tax climate, which is ultimately encouraging seniors to leave and take their money elsewhere.
- Increase the Estate Tax Exemption
People continue to leave the state of Connecticut. Increasing the estate tax exemption could help prevent this. That is why this year I testified in favor of a bill that would increase the Connecticut estate tax exemption; which would ultimately help keep money in the pockets of middle-class families.
Connecticut’s current exemption is $2 million, roughly 37 percent of President Obama’s Federal Estate Tax exemption of $5.4 million. Keeping such a low threshold is another attempt by the state government to reach down and capture middle-class savings. For most families reaching this threshold is the accumulation of an entire life’s hard-work, dedication and perseverance. This money is savings that Connecticut residents have earned and paid taxes on, why is our state requiring them to pay another tax?
Instead, the state should consider smarter policies, like linking our estate tax exemption to the federal threshold. If Congress increases the credit, Connecticut would automatically follow, avoiding any discrepancies with the federal threshold – giving our middle-class families a much needed break from our punitive tax system.
Our tax structure and Governor Malloy’s continual tax increases are not only bad for the economy but they are hurting families, making it hard for people to retire in Connecticut. Until the governor and his majority realize that their continual oversight of hard-working, middle-class families is hurting the state, we will continue to lose valued Connecticut residents to other states – for the simple reason that they cannot afford to live here anymore.