Connecticut Voices for Children: Testimony Regarding Estate and Gift Taxes and Exempting Retirement Income: SB 5, SB 58, HB 6358, SB 6, SB 272, HB 6558, and HB 5587
ITEP Work in ActionExemptions to Pensions and Social Security – Exempting retirement income would not only cause immediate revenue deterioration, but given the state’s aging population, could threaten long-term adequacy of the income tax. According to the University of Virginia’s Demographics’ Research Group, Connecticut’s share of individuals age 65 and older is expected to increase rapidly from 14 percent in 2020 to 23 percent in 2040, at which point only five other states will have larger shares of this demographic. As such, the Rockefeller Institute of Government singles out Connecticut’s “income-tax impact of population-aging”, citing a 5 percent (or, $80) drop in per-capita income taxes by 2030. According to models provided by the Institute on Taxation and Economic Policy (ITEP), targeting a retiree income exemption to residents earning less than $150,000 ($180,000 for married couples) would result in a more strategic distribution of the proposal’s benefit and would have decreased the overall cost by approximately $12 million in 2016.