I am appalled at the sheer magnitude of the $1.6 billion two-year tax increase. It would be hard to imagine a bill that is more anti-economic growth, anti-job creation and more likely to hurt the state economy by providing incentives for taxpayers to leave the state. All these tax increases are unnecessary, given the state budget surplus of $931 million in the fiscal year ended June 30, 2006 and a projected surplus of $560 million in the current fiscal year which will end June 30.

• INCOME TAX - The bill increases the tax rate for families with incomes of $150,000 by 10%, going from a 5% rate to 5.5% rate over two years. This hits middle class families throughout Fairfield County and could, for example, include two teachers. At the new top bracket applying to income over $250,000 the tax increase is… hold your breath… a staggering 40%! For this group the rate would go from 5% to 6.95%. This would exceed the top rate even for “high tax” New York State which tops out at 6.8%.
Worse still, under current law the top 0.2% of tax filers, amounting to just over 3,000 families, pay 77% of the entire state income tax revenues. However, under the new tax increases this same group will pay approximately 90% of all state income tax revenues! This totally destroys two key features of the original income tax. First, it was intended to be a stable and predictable tax, whereas in the future only a tiny fraction of people will be paying almost all of it and it will become highly volatile. Second, an original rationale was that by spreading the income tax burden widely, most families would have some stake in funding the state’s budget and a stake in maintaining fiscal discipline. This no longer applies.
All of this is in the name of funding a budget adopted by the Appropriations Committee which soars through the spending cap limit under the guise of calling this an “emergency year,” which it is not.

• ESTATE TAX – The bill does fix the so called “cliff” under current law, per which estates were untaxed up to $2 million but estates over that amount were taxed back to the first dollar. This cliff was an unintended drafting error in the original bill and should never have been there. Under the new bill the price of the “fix” is a large increase in all estate tax brackets. At the top bracket, the increase will be…again, hold your breath… a 25% rate increase, going from a top rate of 16% to 20%.

• SALES TAX – The bill eliminates the exemption from the sales tax for clothing costing less than $50 per item, which will cost taxpayers $135 million a year. For many years the tacit covenant with taxpayers has been that sales tax would not apply to food, shelter or low cost clothing, but now that is gone regarding the latter.