In Fiscal Year (FY) 2013, Connecticut collected $25.9 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Connecticut taxpayer can afford this level of taxation.
As shown in Chart 1, Connecticut’s state and local tax burden (tax collections divided by personal income) was the fifth highest in the nation for FY 2013 at 11.9 percent—or 16 percent above the national average of 10.3 percent. As shown in Chart 2, Connecticut’s tax burden has grown significantly over time by 83 percent to 11.9 percent in FY 2013 from 6.5 percent in FY 1950.
Connecticut’s high tax burden is driven by a very high property tax burden (4.5 percent, 7th highest), and individual income tax (3.8 percent, 3rd highest). This is offset by a lower than average corporate income tax burden (0.3 percent, 35th highest), sales tax burden (1.8 percent, 38th highest), and all other tax burden (1.6 percent, 38th highest).
Any discussion of Connecticut’s tax burden since 1950 would be incomplete without mentioning the saga of the individual income tax. For most of this time-period, Connecticut had no, or very small, individual income tax. It wasn’t until 1991 that the income tax exploded growing by a whopping 600 percent to 3.8 percent in 2013 from a mere 0.5 percent in 1991.
If Connecticut had never enacted an individual income tax, their tax burden would have been 8 percent in 2013 and ranked as the fourth lowest in the country. Adding insult to injury, the economic results from such a dramatic increase in the tax burden have been dismal. A recent Forbes article on Connecticut’s income tax found depressing economic results:
"Connecticut’s downhill slide seems to have speeded up after 1990. That year, former Connecticut Senator Lowell P. Weicker Jr. campaigned for the governorship by vowing to resolve the state’s financial problems without introducing an income tax. After he was elected, he revealed his true colors and signed an income tax into law. Perhaps some Ivy League arrogance (Weicker went to Yale) impaired his ability to understand "how incentives like lower taxes stimulate enterprising spirits.
"The income tax failed to achieve the wonders Weicker claimed. By siphoning more money out of the private sector, the Connecticut income tax reduced the amount of money available for private sector hiring and reduced the amount of money available for consumer spending. Federal Deposit Insurance Corporation reported, 'no other state in the country has had such stagnation of employment.'"
More proof that taxes matter . . . Connecticut should think of reducing taxes in order to jumpstart their anemic economy.
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Connecticut—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The Connecticut counties with the highest local government tax burden include: Middlesex County, CT (4.8 percent), Hartford County, CT (4.7 percent), New Haven County, CT (4.7 percent), and Litchfield County, CT (4.6 percent). The Connecticut counties with the lowest local government tax burden include: Windham County, CT (4 percent), Tolland County, CT (4.1 percent), Fairfield County, CT (4.3 percent), and New London County, CT (4.5 percent).
J. Scott Moody has nearly 20 years experience as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as the American Conservative Union Foundation, Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.