It is safe to say that during my tenure as your State Senator, I never voted for - or against - a state budget that made everyone happy. This year, though, hidden in the budget are some poor ideas that establish new fiscal policy for our state. It is my belief our new tax policy will not bring in the anticipated revenues and next year my colleagues will be ferreting around trying to figure out what else can be taxed. Connecticut needs to get its act together and needs to develop sound fiscal policies, not hit or miss experiments. As of this writing, there is no long-term plan to develop a better system of supporting spending in the state budget. The Program Review and Investigations Committee is at this time studying Connecticut's tax polices, but will not be reporting the findings to the General Assembly until January 2007. The legislature should have put a moratorium on all new taxes until that study reaches completion. Unfortunately for us, the majority party saw things quite differently.
One of the most egregious aspects of this particular spending plan is the new estate/gift transfer tax, which replaces the prior estate tax that federal law effectively eliminated as of January 1 . The most important thing Connecticut residents have to understand about this new tax is it was a bad idea to die this year thinking you had planned well for your family.
What the General Assembly did was to eliminate the succession and gift tax immediately instead of over several more years, as had been required under state law, and replaces these taxes with a uniform tax on transfers of Connecticut taxable gifts and estates in excess of a combined lifetime total of $2 million. This applies to all estates of people who died on or after January 1, 2005 if the estate's taxable value exceeds $2 million, and if the person was either a Connecticut resident when he died or owned Connecticut real or personal property; to gifts above the federal gift tax threshold (currently $11,000 per year, per recipient) made on or after January 1, 2005 that, in the aggregate over the donor's life, exceed $2 million; and a person's estate, if the combined value of all Connecticut taxable gifts the donor made after January 1, 2005 and his, or her, taxable estate exceeds $2 million.
Qualifying income interest in property passing to a surviving spouse is not taxed until the spouse dies. Nevertheless, the new law requires a Connecticut estate tax return be filed for all estates, regardless of gross value, if the person died on or after January 1, 2005 and was a Connecticut resident, or owned real or personal property in the state, at the time of death.
This tax was passed as part of the state budget adopted in June. One of the questions I asked on the floor of the Senate was whether there would be an exemption for those people who had the misfortune of dying this year with the impression they had carefully planned for their family's future. I was told that, no, this new tax law provides for no exemptions for the survivors of the deceased. That among other reasons was enough for me to vote against the entire budget. This is probably one of the worst taxes, since the income tax was incorporated to put on the books. Without any Republican votes, the budget passed with this as a major finance part of it.
Two million dollars sounds like a king's ransom, even to those of us who live in Fairfield County. One needs to think about exploding property values, Wall Street bonuses and the current booming economy to realize that en estate adds to the threshold rather quickly. What will happen, for example, to a newly widowed young mother (or father) who finds herself (or himself) raising her (or his) children in a house valued at $2 million? What happens to anyone who received, or is due to receive, an inheritance from someone who died, or who owned property, in Connecticut this year? What happens in the event that the estate was already closed out under the old rules? Not a pleasant scenario.
Perhaps this information will help you better understand what this new tax means to Connecticut residents. If the value of gifts or an estate is:
• $2 million or less, there is no tax.
• More than $2 million to $2.1 million, the tax is 5.085% of the excess over zero up to $2.1.
• More than $2.1 million, the tax is $106,800, plus 8% of the excess over $2.1 million.
• More than $2.6 million, the tax is $146,800, plus 8.8 % of the excess over $2.6 million.
• More than $3.1 million, the tax is $190,800, plus 9.6% of the excess over $3.1 million.
• More than $3.6 million, the tax is $238,800, plus 10.4% of the excess over $3.6 million.
• More than $4.1 million, the tax is $290,800, plus 11.2% of the excess over $4.1 million.
• More than $5.1 million, the tax is $402,800, plus 12% of the excess over $5.1 million.
• More than $6.1 million, the tax is $522,800, plus 12.8% of the excess over $6.1 million.
• More than $7.1 million, the tax is $650,800, plus 13.6% of the excess over $7.1 million.
• More than $8.1 million, the tax is $786,800, plus 14.4% of the excess over $8.1 million.
• More than $9.1, the tax is $930,800, plus 15.2% of the excess over $9.1 million. .
• More than $10.1 million, the tax is $1,082,800 plus 16% of the excess over $10.1 million.
It is a sad the General Assembly has chosen to raise money on the backs of bereaved Connecticut families. It is one thing to establish a tax policy - even a bad one - that will apply beginning at some set date in the future. It is wrong to impose a tax policy on people who no longer can object to it - leaving their heirs to figure out a way to comply.
Due to the complexity of this new legislation, if you want a copy of the legislation please contact my office and we will be happy to get it to you. I suggest that if you are in a position to get advice you contact your attorney and your accountants to help you figure out how best to deal with all of this
As always, I am interested in hearing your concerns and ideas, and answering any questions you may have regarding this, as well as any other issue important to our state. I can be reached at my legislative office in Hartford at 1-800-842-1421, or by sending me an e-mail at Judith.G.Freedman@po.state.ct.us .
Senator Judith G. Freedman represents the 26 th Senatorial District, which includes the communities, or portions of the communities, of: Bethel, New Canaan, Redding, Ridgefield, Weston, Westport and Wilton.
(To Editors: Further Contact Information: Catherine Sarault, Senate Republican Office, 860-240-8818) |
