Some states seem intent on pushing the wealthiest, most productive residents out with bad policies. Lately, Connecticut seems to be the most enthusiastic about encouraging its wealthiest citizens to leave, though Illinois, New York and California don’t fall far behind. Now, in an effort to speed further ahead of the high-taxing competition, Connecticut is once again targeting its most productive residents. The Wall Street Journal reports:
Connecticut is a gift that keeps on giving to low-tax states. Democratic Gov. Ned Lamont earlier this year pitched a suite of tax increases on everything from Netflix subscriptions to little Rover’s vet bill. Surprise, surprise, the liberals in Hartford have raised his tax bid with a two-percentage-point surcharge on capital gains.
Folks in Connecticut pay taxes on capital gains at the same rate as ordinary income. For individuals earning more than $500,000, that’s 6.99%. Last week Democrats on the Legislature’s finance committee, which is in charge of developing the state budget, approved the surcharge for individuals in the top income bracket.
Most high earners derive a substantial share of income from capital gains, so the surcharge would effectively raise the top rate to 8.99%. This will hit the hedge funds and finance employees who moved to Connecticut when it was a low-tax alternative to New York.
On the plus side, Democratic legislators junked the Governor’s proposal to tax legal services and horse boarding. They also scrubbed his plan to extend the state 6.35% sales tax to veterinary services, nonprescription drugs and haircuts, though their budget would tax parking, interior design, ride-sharing, dry cleaning and plastic bags.
In retirement, you need to decide if you want to live in a state that sees you as an ATM from which it can withdraw wealth to pay its public sector unions ever higher wages, or if it sees a citizen who it is bound to serve. A state’s proper role is not problem solver and job creator, it’s proper role is to fill its constitutionally required duties to citizens at the lowest possible cost and least restriction of their freedom. When you consider where to retire, keep that in mind.
Read the entire series here.