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 Monday, October 25 2021 @ 06:28 am UTC

Real Estate Tax Raising Plan, Causes Concerns

   
General NewsEvolving into what some are calling class warfare, Gov. M. Jodi Rell's proposal to phase out Connecticut's estate tax is becoming contentious. A legislative committee is scheduled to review the proposal in the next few weeks, but the committee's chairman already is criticizing Rell's proposal as an election-year move that ignores looming future deficits.

The tax is applied to estates of $2 million and higher. However, Rell and others who support her plan say the state loses untold numbers of dollars in income taxes, spending and other money from wealthy residents who move elsewhere to avoid Connecticut's estate tax.

The $2 million threshold would be increased to $4.1 million this year, $5.1 million in 2007, $7.1 million in 2008 and $10.1 million in 2009. Rell's plan calls for gradually eliminating the tax by 2010, pushing up the threshold each year for those who must pay.

"Foolish to dig a trench for ourselves by cutting taxes dramatically when we're projecting deficits," State Rep. Cameron Staples, D-New Haven, co-chairman of the General Assembly committee on state finances, revenue and bonding, said.

That is a sharp contrast to the $661 million projected surplus in the current year, and another surplus of about $500 million in the 2007 budget year. The legislature's nonpartisan fiscal analysis office is forecasting deficits of hundreds of millions of dollars in the 2008, 2009, and 2010 budget years.

Staples said of the estate tax, "I would not want to reduce a tax this year only to have to increase it next year." and added
"How do you propose eliminating a tax when we are facing deficits?" But Rell's spokesman, Judd Everhart, said that any future deficits would worsen if the state's wealthiest residents move out of state and no longer pay income, sales, or other taxes in Connecticut.

Everhart said, "Any CPA will tell a wealthy client to protect assets, and one way to do that right now is to leave Connecticut," and added "Phasing out and ultimately eliminating the estate tax will make Connecticut much more competitive with states like Florida and Arizona, where there is no estate tax."

But Democrats have repeatedly dismissed the idea, saying that the wealthy could have long ago left Connecticut and its high quality of life if taxes were the deciding factor. Republicans have stated for years that increasing estate taxes or instituting the so-called millionaires' tax on the wealthiest residents would drive away those who pay the most taxes to the state.

"Constituents were stunned when lawmakers voted last year to impose the $2 million threshold and make the law retroactive for wealthy people who died after Jan. 1, 2005" State Rep. Livvy Floren, R-Greenwich, who has sponsored a bill to repeal the tax in its entirety this year.

Floren, who represents one of the state's wealthiest districts, said "It's caused a furor because people felt they were truly being gouged," and added "If we can up (the threshold) to $4 million, that's a good start."

By: Dijon Wainwright
 

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