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Please help me on Connecticut

Paul Marks has a question for the blogosphere

Some weeks ago I bought a copy of the American journal Liberty (the September edition). I bought the publication because it had an interesting section on State and local taxes in the United States (written by R.W. Bradford).

On reading the section I found various minor errors (which I will not bore you all with), but one feature of the section keeps tormenting me.

Mr Bradford makes a major point of families in Connecticut paying over a fifth of their incomes in State and local taxes (with the biggest bite coming from property taxes).

Is this really true? Do families in Connecticut really lose more than a fifth of their income (regardless of whether the family income is 25,000 dollars or 150,000 dollars – or anything in between), to the various State and local taxes (income tax, sales tax, property tax and so on).

You see Connecticut is a high income State (so the Feds income tax takes a big chunk of Connecticut incomes). If the State and local governments take more than 20% of people’s incomes (in one way or another) and the Feds take another large junk (in Social Security tax, Income Tax and so on) then people in Connecticut are rather more harshly taxed than people in Britain.

Paul Marks

12 comments to Please help me on Connecticut

  • Dan Lewis

    Email me to remind me, but as a CT resident, I can check on this. I know that local taxes here are a function of assessed property value (and therefore independent of income), but the income tax is another question.

  • Eve

    I don’t know the exact rate(s) of CT state income tax, but my sister lived in CT during the period when they went from having no income tax to having one. A couple of years later, she and her family had to move out of state because the taxes were sucking them dry. They moved to NJ and had a much better standard of living.

    It’s commonly figured in the U.S., by the way, that taxes at all levels generally eat up about half your income. There’s the federal income tax (from the %20′s to the %30′s), the Social Security tax (which is nearly 16% ifyou count both your half and your employer’s half — the self-employed know this), the state income taxes (41 states), capital gains taxes, death taxes, excise taxes, sales taxes, … That’s not even to mention various fees and the direct and indirect costs imposed by regulations.

  • don

    Well, remember in the US property taxes are generally deductible against Federal income tax. One reduces the other.

    But yeah, unless you’re poor, you end up donating about 45% – 50% of income to the government.

  • DCE

    I know my parents are spending a large portion of their income on taxes. They’ve lived in Connecticut since their retirement and the state taxes keep going up. Property taxes on their home have tripled in the past three years, so over $11,000 of their income goes to the town in taxes. That’s why they’re giving up their retiirement home and moving to New Hampshire. The property taxes are no bargain in NH, but there’s no state income or sales tax.

  • me

    Yeah . . . you hear that taxes are high in Europe – are they really much worse than the 50% or so you hand over to the various governments here in the USA?

  • Mike

    Well let me see:

    Income Tax 25-40%
    National Insurance 10% (+employers 11%(I think))
    Value Added (Sales)Tax 17.5%
    Property Tax about £2000
    Various taxes on smoking and drinking (about 70%)
    Tax on fuel (approx 80%)
    Road Tax
    etc etc.

    The overall average burden must be up around the 60-65% mark and the UK is a ‘low’ tax society compared to most of Europe or so we are told!

    Not very scientific analysis I know but you get the idea.

  • Texas is one of the few (eleven?) states where there is no state income tax. We also issue licenses for concealed carry of firearms. All in all, it means we’re safer and more affordable than, say, our nation’s capital.

    (I’m told that when the Libertarian Party had its annual convention in DC – in 1996, I think – there was a noticeable drop in female turnout, the ladies being deterred by the city’s abysmal crime rate. I guess that’s one way to reduce the libertarian presence in DC.)

    The price of a gallon of gas is a fairly decent economic indicator. In the more expensive parts of Dallas (I live in Irving, where city government isn’t dominated by sociopaths), it goes for about $1.35 or so for a gallon of regular unleaded. Bet the Connecticut Yankees can’t beat that.

  • While I realize that this is a drop in the bucket compared to European gas taxes, I would point out that at $1.35, the tax rate on gas in Dallas in 40%. That is, $0.384 per gallon goes to federal and state taxes. The price of gas is an excellent indicator of how high taxes are and how regulated the gas is.

    The top state income tax in CT is 4.5%. There is no deduction for federal income tax allowed. The property tax rate varies quite widely across the state, but in the major counties it looks like about $30 per $1000. The sales tax rate is 6%. Since property ownership and spending habits vary, I’m not sure how you could convert this to an average rate without more information.

    Separately, Oregon appears to be looking to become the highest tax state. They will have a measure on the ballot this November which would completely socialize health care. I direct you to this site (which supports the bill) for the gory details, but they plan to pay for it with an 8% increase in income tax (they already pay 9%, federal tax not deductible), and a payroll tax of 11.5%. So the total income tax burden (state-level only) will go to 28.5%. After federal income and social security taxes, the highest income people will be paying on the order of 75% of income in taxes before they even get to property taxes, etc. Of course, there won’t be any such people left in Oregon, so I’m not sure who will be paying these taxes. Opponent of the bill estimate the cost at $12 billion per year. By comparison, Oregon’s General Fund budget is currently $9.5 billion per two years.

  • jdhays

    TaxFooundation.org claims that the 2002 “total taxes as a percentage of income” for Connecticut is 10.9%(state and local) or 36.7%(state, local, and federal).

    The numbers for New Jersey seem to be “right”: 10.3% (6% sales tax + 1.5%-7% + income tax +property tax) or 34.3% (10.3% + 7.65% payroll tax + 15% income tax). Your mileage may vary.

  • The way to answer the question isn’t to look at tax rates, which are variable with income, and, with property taxes, variable independently of income; but to look at the tax revenue that the State of Connecticut receives, and at the tax revenue that the various towns and cities and counties and school districts and local assessment disctricts and special districts all receive, and divide that number by the total income of all people in Connecticut.

    The tax revenue received by the State, by the larger towns, and by the counties will likely be relatively easy to find or research, though one has to be careful not to double-book money transferred from one government entity to another. If Connecticut allows school districts or special districts to tax people directly, rather than through the counties or the state, there’s an awful lot of legwork to be done.

    I would not be surprised if Connecticut has a pretty high tax burden relative to other states – having fewer poor people means that fewer people are passed over by the tax man, and being basically a suburb of New York City means that politics there is likely pretty social-democrat.

    Here in California, property tax accounts for between 5% and 15% of people’s rent. A newly-purchased house will pay property tax of 1% of the purchase price (up to 1.25% in high-tax cities and counties) per year. Meanwhile, with mortgage rates hovering just above 6%, payments on a 30-year loan will be less than 7% of the purchase price. Add in insurance, and the cost of a house is about 9% of the sale price, per year. A person who owns a rental property will set the rent at what the market will bear, but if that cannot cover the payments required, will sell the house. So a house for rent at $1800/month is paying about $200 in property tax. If the house was purchased longer ago, then property tax is proportionally lower, since in California, the assessed value of the house can only increase 2% per year until it is resold. (Thank you, Jarvis & Gann!) As rent accounts for about 50% of a poorer family’s expenditures, poor folk are likely paying about 5% of their income in property tax, collected by landlords.

  • Mr Incorrigible

    I live in Connecticut and work as a programmer for a firm that writes software for municipal (city level) tax assessors and collectors. I won’t use my real name or name my employer, but I can tell you that Connecticut residents easily lose a fifth of their income to taxes on income, property, automobiles and purchases.

  • Newly Yankeefied

    As a CT resident, I can tell you the tax rates are high, but not that high. Of course, percentage of money going to taxes depends on income. CT also has a nasty little item called the personal property tax, which applies to cars, boats, etc., and while not really very high, is a dirty trick to my way of thinking. Property taxes are actually lower here than in NY, and the sales tax soes not apply to food. Throw it altogether, and it takes about 10-12% of income. One smart thing they’ve done (unlike NJ and NY) is raised the gas tax a few cents and then gotten rid of all the tollbooths in the state. I know the lib take on this is that people who don’t use the roads shouldn’t have to pay the toll, but any money you might lose in lighter road use you more than make up in gas money saved in not waiting for tolls. NJ and NY are starting to solve this problem with EZ pass.