An increasing number of struggling, low-income Connecticut families are required to pay state income taxes, because the state has failed to increase the “tax threshold,” the income level at which families begin paying taxes. Of the 42 states, including the District of Columbia, that have a state income tax, Connecticut is the only state that has not adjusted its tax threshold upward since 1991, according to a report released by Connecticut Voices for Children and the Center on Budget and Policy Priorities. As a result, more low-income families have been paying income taxes, and without legislative action, Connecticut will be taxing families at the poverty level within a few years.
When Connecticut first instituted its income tax in 1991, the state was a national leader in its support of low-wage families by not requiring many to pay the tax. At the time, Connecticut had the highest tax threshold in the nation. But by 2007, 22 states and the District of Columbia had higher tax thresholds than Connecticut. In 1991, the tax threshold for a family of four was 73% above the federal poverty level. However, today, the threshold is just 14% over the poverty line, the largest decline in the nation. Connecticut’s trend is the opposite of most states. On average, states have increased their tax thresholds by 25% relative to the poverty level.