Welcome to my seventh in a series on state taxes! For information about what I’m trying to do, read my introductory bit. Next on the agenda, Connecticut (home of the Connecticut Employment Lawyer Blog).
CONNECTICUT
Population: 3,501,252 (29th)
Capital: Hartford
Largest City: Bridgeport
Gross Domestic Product: $204 billion
GDP per capita: $54,117 (1st!)
2008 election winner: Barack Obama
web site: http://www.ct.gov/
Income Tax
Connecticut does collect personal income tax. Taxes are divided into two tax brackets of 3% and 5%. All wages of a Connecticut resident are subject to the state’s income tax, even when the resident works outside of the state. However, as with many states which have bedroom communities to major metro areas, tax is only collected when it exceeds tax in the other state. Since everyone many high-earning wage earners who live in Connecticut work in New York, those folks pay no income tax on those wages to Connecticut. The income must still be reported on the return, however, in order to receive the credit for taxes paid to New York another state.
Connecticut taxpayers must generally file an income tax return if they lived or worked in Connecticut for part or all of the year. Income thresholds apply, starting at $12,000.
Your filing status for Connecticut purposes is… a great deal different for some taxpayers than their filing status for federal purposes. For most taxpayers, you file the same as you would for federal purposes (single, married filing jointly for federal and Connecticut, married filing separate for federal and Connecticut, or head of household, qualifying widow(er) with dependent). But there’s an additional category for some taxpayers: married filing jointly in Connecticut only.
The latter status (married filing jointly in Connecticut only) is a nod to individuals who are parties to a civil union recognized under Connecticut law. Same sex marriages and civil unions are recognized in Connecticut but not for federal purposes.
Pension and annuity benefits received by Connecticut residents are subject to Connecticut income tax to the extent that these benefits are includable for federal income tax purposes. This applies even if the pension is paid by an out of state employer.
Since military is huge in Connecticut (I should know, as my brother is stationed there), there are special rules for military personnel. Here’s the most important rule: if you weren’t domiciled in Connecticut before you entered the military and you were later assigned to active duty in Connecticut, you do not become a Connecticut resident just because you live there now. If your home of record is in another state, you are a nonresident and your military pay is not subject to Connecticut income tax.
Connecticut does participate in the Treasury Set Off program. A Connecticut state tax refund will be taken to satisfy any outstanding liabilities owed to Connecticut or to the Internal Revenue Service; a federal refund will be taken for same.
Like Colorado, Connecticut makes it easy to designate your refund to charity. For 2008, the check off options were:
- AIDS Research
- Organ Transplant
- Endangered Species/Wildlife
- Breast Cancer Research
- Safety Net Services
- Military Family Relief Fund
Sales Tax.
Connecticut levies a 6% state sales tax on the retail sale, lease, or rental of most goods. Food for consumption, medical goods and services and clothing under $50 – the usual suspects – are exempt. Some interesting exemptions include college textbooks, compact fluorescent lights and rare coins.
There are two additional exceptions:
- The sales tax rate for the sale of computer and data processing services is 1%.
- The sales tax rate is 4½% on the sale of a motor vehicle to a nonresident member, or a member and his or her spouse jointly, of the armed forces of the United States stationed on full-time active duty in Connecticut.
There are no separately collected local or municipal sales taxes.
Tobacco Tax
Connecticut’s cigarette tax is $2.00 per pack pack, which ties it for the 6th highest rate in the country. The national average now stands at $1.23.
Gas Tax
The gas tax rate in Connecticut is $.364 per gallon, making it the 3rd most expensive state in which to buy gas – just behind New York and California.
Property Taxes
Connecticut does impose taxes on real property based on the assessed value of the property. Property tax calculations are determined using 70% of the assessed value.
As you would expect so close to New York, Connecticut property tax collections are quite high. In 2006, Connecticut ranked second in property collections per capita and per household; only New Jersey is higher (also close to New York… Hmm….).
Inheritance and Estate Tax
As you might expect in a state with wealthy residents, Connecticut imposes an estate tax. The tax is on the transfer of estates valued at $2 million or more beginning at 5% of the first $100,000 and increasing to 16% for estates over $10 million.
Overall Tax Burden
The overall tax burden in Connecticut, taking into account taxes paid by individuals, results in a ranking as 3rd most-tax burdened state in the country, according to Tax Foundation. That sounds high but it’s an improvement over 1998 when it was ranked 1st.
taxgirl says
Connecticut is a bit eclectic. And I don’t just say that because they are represented by Democrat Republican? Independent Senator Joe Lieberman.
I say it more because of the incredible disparity in income in the state (much like another high tax state, New Jersey). The city of New Canaan has one of the highest per capita incomes in America with a per capita income of $85,459 while the capital, Hartford is one of the ten cities with the lowest per capita incomes in America ($13,428).
The individual income tax rate is actual relatively low and, in a state with such varied incomes, you would expect a two-tiered system.
The lion’s share of Connecticut’s tax burden comes in the form of extremely high property taxes per capita. I suspect the “per capita” bit is attributable to the high priced housing near the New York state line. Property taxes account for, on average, nearly 40% of the Connecticut taxpayer’s tax burden.
Gas taxes are also pricey. Not surprising since taxes in New York are so high. It may be a case of keeping up with the New York Joneses (not to be confused with Jones New York).
With respect to American Recovery and Reinvestment Act (Recovery Act) dollars, Connecticut is near the top of the pack in terms of funding allocations. The state is slated to receive more than $2.6 million from ARRA with the biggest chunk going to the Department of Education.
While the tax burden is heavy, it doesn’t seem to be driving folks away from the state. I suspect a healthy military and student population has contributed to the overall economy of Connecticut – as well as high dollar jobs in Manhattan.
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(Note: tax rates were current as of 08-12-2009 and were taken from the CT Department of Revenue Services)
