Business groups say retiree tax cuts are just one step to growing economy | Crain's Connecticut

Business groups say retiree tax cuts are just one step to growing economy

About two dozen bills have been introduced during this year's General Assembly that aim to reduce or eliminate income taxes on Social Security and pensions. | Photo of the Connecticut State Capitol in Hartford via Creative Commons

About two dozen bills are currently active in the General Assembly aiming to provide tax relief to retirees, an effort that's generally favored by the business community.

The bills are designed to stem the exodus of retirees to places that have do not have income taxes, especially warmer climate states such as Florida and Nevada, tax experts say. Connecticut is one of 13 states that imposes taxes on Social Security income, Wolters Kluwer Tax and Accounting reports. It is also one of at least 15 states that taxes pension income.

Connecticut lost 75,852 people to other states between April 2010 and July 2014, according to U.S. Census Bureau estimates.

Beginning in January, with the start of the latest General Assembly session, Republicans have offered a slew of bills aimed at lowering or eliminating taxes on Social Security and pensions. While Democratic Gov. Dannel P. Malloy’s budget plan was generally well-received by the business community, Connecticut’s tax atmosphere remains a disincentive for many.

“It’s still the usual awful,” said Eric Green, a tax attorney with New Haven-based Green & Sklarz LLC. “Part of it is the government’s fault and part of it isn’t.”

Green said he has been spending increasing amounts of time counseling residents on how to exit Connecticut without incurring significant tax liabilities. There is an Assembly bill that would level a 50 percent surcharge on retirees that move out of state.

“People need to plan appropriately to disengage,” he said. “Connecticut is very aggressive in trying to drag you back.”

While sympathetic to the plight of retirees, some of whom live on fixed incomes, leading business groups say expanding the state’s overall economy is the best thing for retirees and everyone else.

“They’re not a forefront of what we’re pursuing,” said Louise DiCocco, a counsel at the Hartford-based Connecticut Business and Industry Association. “Generating growth is more important so we can reach these other issues down the line.”

CBIA is Connecticut’s largest business association with a membership of about 10,000. The Connecticut economy may be heading to higher ground, the group said, following the release of January jobs statistics that showed a gain of 5,700 for the month. Overall in 2016, Connecticut lost more jobs than were created with a net figure of minus 200.

 

The National Federation of Independent Business has not taken a position on any of the bills, although it is generally supportive of keeping retirees in Connecticut, said Andrew Markowski, the federation’s Connecticut director.

He called keeping retirees “good for small business" since retirees help “stabilize the economy."

“We are concerned about anything that impacts our already declining revenue in the state,” he said. “The best way to help retirees in Connecticut is to have a better economic and tax climate and to reduce the local property tax burden.”

Lower-than-expected income tax receipts have bedeviled the state budget in recent years. In a March 1 press release, Comptroller Kevin Lembo said the state is on track to finish the fiscal year with an $11.8 million surplus, although that assumes that final income tax payments in April will outperform estimated income tax payments made so far.

The Connecticut Department of Revenue Services has no position on the retiree tax-cut bills, spokesman Jim Carson said.

“We’re just the collection department; I know that sounds boring, but that’s how it is,” he said. “We just implement whatever policy is adopted.”

Not surprisingly, senior citizens are enthusiastic about the proposed tax relief, although the American Association of Retired Persons says there is more to consider.

“We definitely hear from people wanting these ideas,” Nora Duncan, AARP’s Connecticut director, said of the bills. “But the economic situation for Connecticut seniors is pretty wide-ranging. It’s a little more complex than just taxes.”

Retirees who are military veterans will be getting tax relief this year, said Timothy Bjur, an Illinois-based senior writer/analyst of state income taxes who follows Connecticut for Wolters Kluwer.

There will be no Connecticut income tax on pensions for military veterans beginning this year, Bjur said. Previously, up to 50 percent of retirement benefits was exempt from taxation. The exemption amount is moving to 100 percent for tax year 2017, he said.

Connecticut is “quite generous” in granting personal and dependent exemptions to taxes on Social Security income, Bjur said.

Teachers also get generous tax treatment, Bjur noted. To the extent that it is included in federal gross income, 10 percent of income received from the Connecticut teachers retirement system may be subtracted from Connecticut gross income for the 2015 tax year with the amount rising to 25 percent for tax year 2016 and 50 percent for tax year 2017 and beyond, he said.

 

March 10, 2017 - 4:02pm