WHEREAS:
1. CT has been in a deep financial budget crisis for months, but Governor Dannel Malloy says increases in the tax rate on millionaires is "off the table";
2. Raising the sales tax hurts those least able to pay;
3. Big cutbacks in state aid to municipalities, public schools and colleges will result in higher local property taxes, rents, and student debt;
4. Ability to pay should be a key factor in tax policy;
5. Most of the increase in US wealth since the 2008-09 Financial Crisis has benefited the top 1%, while homes were foreclosed and workers' wages and benefits have stagnated, continuing a trend since 1976;
6. CT is the home of many hedge funds, particularly on its Gold Coast in SW CT. Hedge Funds aggregate billions of dollars from wealthy people to gamble for high returns, frequently by risky and illegal methods. Examples are oil and commodity speculation, insider trading, front-loading stock trades, and computer controlled, high volume stock trading. The owners of hedge funds benefit from a huge tax loophole. Republicans and Democrats have protected this tax loophole, which is known as "carried interest". This is how rich people protect and obscure their wealth. The largest hedge fund in the world is Bridgewater Associates with holdings of $160 BILLION, located in Westport, CT, founded and controlled by Ray Dalio, whose wealth is estimated at $17 BILLION;
7. Hedge fund CEOs, other wealthy speculators, and corporate executives will not leave the state en masse because they must reside close to New York, but they realize expenses are even higher in NYC.
8. Hedge fund tax loopholes mean they dramatically underpay federal taxes. For instance, the top federal income tax rate is 39.5%. However, IRS data show that the effective tax rate of the 400 richest US families is only 17.5%, a lower rate than many average families. Since CT income taxes are based on the federal tax adjusted gross income, hedge fund operators then underpay their CT income tax. Other CT taxpayers make up for the underpayment of the millionaires. Moreover, CT millionaires claim an average of $329,422 in deductions for state and local taxes on their federal income tax forms (CT Mirror and IRS data). If we force CT millionaires to pay a higher tax rate, they will then get a higher deduction for state and local taxes on their federal returns, but it will be a just victory in reversing some of their tax underpayments.
THEREFORE:
We believe THE CURRENT CT TOP INCOME TAX RATE OF 6.99% SHOULD BE RAISED TO 10% ON INCOMES OVER $1 MILLION. IT SHOULD GO UP IN STEPS TO 20% FOR INCOMES OVER $2 BILLION PER YEAR.
