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Taxpayers should act to create a more equitable and sustainable tax system to punish middle-income retirees with income cliffs and marriage penalties, according to CTMirror.org.
The current approach to determining income tax on retirement income in Connecticut is fundamentally flawed.
The Flaws of Connecticut’s Retirement Income Tax System
The current method for calculating Connecticut income tax on retirement income is flawed, creating an income cliff for those with AGI under $75,000 and $100,000 respectively. Starting in 2023, exemptions for IRA withdrawals will be phased in over four years, but the same income thresholds apply based on the report of Courant.
Connecticut’s retirement income tax system has flaws, such as a 4,899% increase in income for married couples and a doubling of state income tax due if married couples or single retired people with identical retirement incomes.
The flaws in Connecticut’s retirement income tax system have serious implications for retirees, with the income cliff and marriage penalty increasing the number of people affected. Middle-income retirees are being punished with a tax burden that is disproportionate to their income, leading to them considering relocating to a more tax-friendly state.
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Urging Action to Fix Connecticut’s Retirement Income Tax System
The income cliff and marriage penalty are being considered by the Finance, Revenue & Bonding Committee, with broad bipartisan support for eliminating them. This is the first time this year that proposals are being considered to eliminate these provisions.
Taxpayers should urge the governor, legislators, and Finance, Revenue & Bonding Committee to take action on a bill that will mitigate the impact of current tax policy on middle-income retirees. This will create a more equitable and sustainable tax system that supports all residents regardless of income or age.
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