Testimony on H.B. 7415: AAC As Surcharge on Capital Gains

Committee on Finance, Revenue & Bonding

April 26, 2019

Submitted By: Stephen Wanczyk-Karp,  LMSW

The National Association of Social Workers, CT Chapter representing over 2,500 members supports H.B. 7415. This bill is a starting point toward a fairer budget that shares the burden on balancing the budget based on a household’s ability to contribute. We thank the Committee for raising this bill.

As stated above, H.B. 7415 is a beginning in terms of raising additional revenues that will mitigate reductions in core safety net programs, necessary health care supports, and human services funding that assists the poor, persons with disabilities, elderly persons, and low-income children & family households.

In addition to a capital gains surcharge tax we urge the Committee to support and include in the Finance Committee budget proposal the following revenue streams:

  • Personal Income Tax: Increase the rate by 1% for single filers on income over $250,000 and couple’s filers income over $500,000.
  • Broaden Sales Tax: Expand taxable items to include services and items not currently taxed, especially on luxury items that are now exempt. Apply the tax to online purchases. However, given the regressive nature of the sales tax we only support a broadening of the tax when combined with an increase in the personal income tax on high income households. The exception is that we support broadening the sales tax to luxury items in any budget proposal.
  • Tax Sugary Drinks and Diet Drinks: The health costs of obesity and the recognition of the long-term health risks from the consumption of sugary drinks and diet drinks can begin to be addressed by raising the cost of all soda and other sugary or diet drinking products. This would encourage behavior change at the same time that it brings in new revenue, in the same way that the cigarette tax has discouraged smoking and provides needed revenues.
  • Estate and Gift Tax: Do not repeal the Estate and Gift Tax and decouple the rate from the federal thresholds.

It has been argued that supporting H.B. 7415 and further taxing high income households will backfire, as the wealthiest amongst CT residents will leave the state. We reject this argument as nothing more than a scare tactic. In fact, the number of income tax filers reporting income of over $1,000,000 has increased by 3,936 for the period of 2004-2017 (taxes were increased during this time period). Residents choose to reside in CT for its good quality of life, excellent education systems (especially in wealthy towns where the highest earners live), and for family & employment commitments. The costs of “moving out of state” would exceed the increase in taxation being proposed, clearly not a financially sound decision! Plus, surrounding states are not less expensive, yet may not offer the advantages of living in Connecticut.

The Legislature needs to address the state budget deficit progressively, both in the short period of the next biennial budget and the longer-term structural costs. In so acting we call upon the Legislature to resist further cutting of core safety net programs, such as Medicaid and MSP, child care, mental health services, school-based health centers, children and elderly nutrition programs and SAGA. Without new taxes and greater progressivity of current taxes, devastating cuts to human services, education, health care and local aid will be required, negatively affecting every community.

Progressive increases in taxation must be the first approach taken in creating a fair budget. The wealthiest in our state already received a significant tax break under the new federal tax rules. Now the highest earning households must be asked to pull their fair weight in balancing the state budget.

Why is it alright to absolve the wealthiest households from paying a little more in taxes, when the result will be significantly reducing economic supports for the lowest income households? As the state’s largest organization of professional social workers, we urge the Finance Committee not to pass such an upside-down budget.

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