Panel takes on Connecticut’s ‘honeycomb’ of taxes

By SUSAN HAIGH
Associated Press

HARTFORD, Conn. (AP) _ A panel of accountants, former state legislators and experts in tax law, economics and finances has taken on the daunting task of reviewing Connecticut’s tax structure to come up with ways to modernize the system with an eye toward making it more fair, equitable and stable.

The yearlong review is supposed to be conducted with the help of a paid consultant. It marks the first time since 1991, when the state enacted a personal income tax, that such a major tax study has been undertaken. It comes as Connecticut continues to face budget challenges following the 2007-09 economic recession, with billion-dollar deficits predicted in the coming years.

“We now have 35,000 people who pay 45 percent of the entire taxes,” said former state Sen. William Nickerson, a Greenwich Republican who is co-chairing the State Tax Panel. “That is a very precarious and unreliable way to run a railroad.”

The group, which is scheduled to meet next month, is still determining its focus for the coming months. But Nickerson predicted the state’s reliance on the personal income tax _ which produces about half the state’s revenue _ will be one of many issues reviewed. Nickerson predicted the members will also review what he called the “honeycomb” of complicated state taxes and exemptions, including the corporate income and sales taxes, in an effort to make the state more economically competitive.

“The whole purpose of reducing the complexity and what I call the honeycomb would of course reduce the rate,” said Nickerson, who is leading the panel with former state Rep. William Dyson, a New Haven Democrat.

Dyson, the former longtime chairman of the legislature’s Appropriations Committee, said the consequences of those taxes have not been examined closely.

“There is a whole basket of various taxes and credits and the like and I suspect a whole bunch of people don’t begin to understand the impact of them,” he said. “We put them in place and no one dares to go back and question if they’re working.”

Taxes were a major issue in this year’s tight race for governor, with Democratic Gov. Dannel P. Malloy coming under fire from Republican Tom Foley for increasing taxes in 2011 to help cover a budget deficit. Foley had promised to make Connecticut more tax-friendly for retirees and would cut the sales tax. Malloy, who won re-election, has promised he won’t rely on higher taxes to deal with projected deficits of more than $1 billion a year in each of the next several fiscal years.

The General Assembly’s minority Republicans, however, predict the governor will ultimately agree to higher taxes, something he has denied.

A report by the personal finance website Wallethub, released earlier this year, determined Connecticut had the country’s fourth highest per capita tax burden. The average Connecticut resident paid $9,099 in state and local taxes _ 31 percent more than the national average. Neighboring New York was the worst, with a per capita tax burden of $9,178.

“I’d like to focus on trying to bring a greater degree of fairness to our tax structure, more so than we have now,” said Dyson, referring to taxes on both individuals and businesses. He said the group also needs to be honest with taxpayers about the state’s revenue needs.

State Rep. Patricia Widlitz, D-Guilford, the retiring co-chairman of the legislature’s Finance Revenue and Bonding Committee, said now is the time for Connecticut to upgrade its tax system.

“It is no longer sufficient to make minor adjustments to our tax structure, which has not kept up with the fact that we are part of a global economy,” she said.

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