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Home » End of Trump tax cuts could mean $3,300 more in taxes for CT residents
Posted inNews
End of Trump tax cuts could mean $3,300 more in taxes for CT residents
by
Marc E. Fitch
May 14, 2024May 14, 2024
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Credit: White House pub lic domain
The expiration of federal tax cuts made during President Donald Trump’s administration, known as the Tax Cuts and Jobs Act (TCJA), could mean residents across the state of Connecticut will be forking over between $2,200 and $7,100 more in federal taxes with an average of $3,339, according to a recent study conducted by the Tax Foundation.
The TCJA for both businesses and individuals is set to expire at the end of 2025, and although President Joe Biden has signaled he will let the tax cuts expire, saying they benefitted corporations and added trillions to the national debt, officials in his administration walked back some of those comments to say Biden’s budget would only let the tax cuts expire for corporations and those making over $400,000.
The Tax Foundation broke down the estimated impact of TCJA expiration by congressional district: Districts one and three would see $2,245 more in federal taxes; districts two and five would see between $2,520 and $2,532 in increased federal taxes; and district four, which contains some of Connecticut’s wealthiest areas, would see a whopping $7,169 in increased federal taxes.
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The majority of those changes came from individual tax rate and bracket changes, according to the Tax Foundation, along with the standard deduction expansion. However, the calculus changes for district four, in which expiration of changes to the alternative minimum tax, which “reduces the value of tax preferences” and adds deductions to income for high-income individuals and families, adds $2,109 in federal taxes.
Trump’s tax changes in 2018 sent Connecticut lawmakers and Gov. Dannel Malloy scrambling for a workaround to the cap on the State and Local Tax (SALT) deduction, eventually crafting a complicated system called the Pass-Through Entity Tax (PTET) in which businesses would be taxed at Connecticut’s corporate tax rate and then credited back 93 percent, putting them in line with the personal income tax rate.
However, the General Assembly, during a budget crunch, quickly rolled back the credit to 87.5 percent, which meant businesses using the pass-through entity tax ended up paying more and having to rework their books. The PTET is one of Connecticut’s largest revenue sources, taking in an estimated $1.9 billion for fiscal year 2024, according to the latest consensus revenue estimates.
The Tax Foundation indicated that if the SALT cap is repealed, it would have the greatest effect on deductions in “higher tax localities on the coasts of the U.S.” Connecticut, with some of the highest property taxes in the country, would see a benefit from the removal of the SALT cap between $315 in district one and $4,606 in district four, but it’s unclear how that change would affect the state’s PTET.
Whether the TCJA will expire in full, or only partially, remains to be seen as Biden ramps up for another presidential campaign against former President Donald Trump, and as Republicans in the House of Representatives push to either extend the TCJA tax changes or make them permanent.
According to President Biden’s budget fact sheet, Biden “would extend all middle-class tax cuts,” and says he will pay for those tax cut extensions through “additional reforms to make the wealthy and corporations pay their fair share.” That includes eliminating some tax loopholes for corporations, raising their tax rates, and increasing the top rate for individuals and married couples making more than $450,000 per year from 37 percent to 39.6 percent.
The nonpartisan Congressional Budget Office (CBO) released a report in May that found extending the TCJA past its deadline through 2034 would add $3.5 trillion to the national debt, a report seized upon by Senate Democrats.
However, the Tax Foundation also estimates that maintaining the tax cuts – which they also estimate would cost $3.8 trillion over ten years – could increase job creation by 904,000 across the country.
“The resulting increase in employment would otherwise not occur if the TCJA is allowed to expire as scheduled in 2026 or is not made permanent,” authors Garret Watson and Jessica York wrote. “Making the TCJA individual tax provisions permanent and canceling the TCJA-related business tax hikes would raise long-run GDP by about 1.1 percent, increase wages by about .3 percent, and create a .9 percent larger national capital stock.”
The average increase in federal tax costs for Connecticut residents would be $3,339, the tenth highest in the country, behind states like California, Colorado, Massachusetts, and Florida, according to the Tax Foundation’s estimates.
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If you have any other questions, contact us at info@insideinvestigator.org.End of Trump tax cuts could mean $3,300 more in taxes for CT residents
by Marc E. Fitch, Connecticut Inside Investigator
May 14, 2024
End of Trump tax cuts could mean $3,300 more in taxes for CT residents
by Marc E. Fitch, Connecticut Inside Investigator
May 14, 2024
The expiration of federal tax cuts made during President Donald Trump’s administration, known as the Tax Cuts and Jobs Act (TCJA), could mean residents across the state of Connecticut will be forking over between $2,200 and $7,100 more in federal taxes with an average of $3,339, according to a recent study conducted by the Tax Foundation.
The TCJA for both businesses and individuals is set to expire at the end of 2025, and although President Joe Biden has signaled he will let the tax cuts expire, saying they benefitted corporations and added trillions to the national debt, officials in his administration walked back some of those comments to say Biden’s budget would only let the tax cuts expire for corporations and those making over $400,000.
The Tax Foundation broke down the estimated impact of TCJA expiration by congressional district: Districts one and three would see $2,245 more in federal taxes; districts two and five would see between $2,520 and $2,532 in increased federal taxes; and district four, which contains some of Connecticut’s wealthiest areas, would see a whopping $7,169 in increased federal taxes.
The majority of those changes came from individual tax rate and bracket changes, according to the Tax Foundation, along with the standard deduction expansion. However, the calculus changes for district four, in which expiration of changes to the alternative minimum tax, which “reduces the value of tax preferences” and adds deductions to income for high-income individuals and families, adds $2,109 in federal taxes.
Trump’s tax changes in 2018 sent Connecticut lawmakers and Gov. Dannel Malloy scrambling for a workaround to the cap on the State and Local Tax (SALT) deduction, eventually crafting a complicated system called the Pass-Through Entity Tax (PTET) in which businesses would be taxed at Connecticut’s corporate tax rate and then credited back 93 percent, putting them in line with the personal income tax rate.
However, the General Assembly, during a budget crunch, quickly rolled back the credit to 87.5 percent, which meant businesses using the pass-through entity tax ended up paying more and having to rework their books. The PTET is one of Connecticut’s largest revenue sources, taking in an estimated $1.9 billion for fiscal year 2024, according to the latest consensus revenue estimates.
The Tax Foundation indicated that if the SALT cap is repealed, it would have the greatest effect on deductions in “higher tax localities on the coasts of the U.S.” Connecticut, with some of the highest property taxes in the country, would see a benefit from the removal of the SALT cap between $315 in district one and $4,606 in district four, but it’s unclear how that change would affect the state’s PTET.
Whether the TCJA will expire in full, or only partially, remains to be seen as Biden ramps up for another presidential campaign against former President Donald Trump, and as Republicans in the House of Representatives push to either extend the TCJA tax changes or make them permanent.
According to President Biden’s budget fact sheet, Biden “would extend all middle-class tax cuts,” and says he will pay for those tax cut extensions through “additional reforms to make the wealthy and corporations pay their fair share.” That includes eliminating some tax loopholes for corporations, raising their tax rates, and increasing the top rate for individuals and married couples making more than $450,000 per year from 37 percent to 39.6 percent.
The nonpartisan Congressional Budget Office (CBO) released a report in May that found extending the TCJA past its deadline through 2034 would add $3.5 trillion to the national debt, a report seized upon by Senate Democrats.
However, the Tax Foundation also estimates that maintaining the tax cuts – which they also estimate would cost $3.8 trillion over ten years – could increase job creation by 904,000 across the country.
“The resulting increase in employment would otherwise not occur if the TCJA is allowed to expire as scheduled in 2026 or is not made permanent,” authors Garret Watson and Jessica York wrote. “Making the TCJA individual tax provisions permanent and canceling the TCJA-related business tax hikes would raise long-run GDP by about 1.1 percent, increase wages by about .3 percent, and create a .9 percent larger national capital stock.”
The average increase in federal tax costs for Connecticut residents would be $3,339, the tenth highest in the country, behind states like California, Colorado, Massachusetts, and Florida, according to the Tax Foundation’s estimates.
This article first appeared on Connecticut Inside Investigator and is republished here under a Creative Commons license.
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Tagged: taxes
Marc E. FitchSenior Investigative Reporter
Marc worked as an investigative reporter for Yankee Institute and was a 2014 Robert Novak Journalism Fellow. He previously worked in the field of mental health is the author of several books and novels,…
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