Connecticut approves new 'mansion tax' with a twist
Some wealthy Connecticut residents are in for another tax hike.
Connecticut’s Democratic Gov. Ned Lamont and state Democrats recently came to agreement on a two-year $43 billion budget plan, which is riddled with a number of new or expanded taxes as the state seeks to raise revenue to combat a projected $3.7 billion budget deficit over the next two fiscal years.
Though the state will not raise income taxes, as pushed for by a group of millionaires in the state, some wealthy residents will pay up through a raise in the so-called mansion tax.
The mansion tax is a 2.25 percent conveyance fee on homes sales above $2.5 million. The tax, however, only applies if the seller is moving out of state. Those who move to another residence within the state would get the money back a few years after the sale, in the form of an income tax credit.
It was likely structured that way because property taxes are local – and local governments would not know whether a person stayed in a state – but state income tax administrators will, Chris Edwards, director of tax policy studies at Cato and editor of www.DownsizingGovernment.org, told FOX Business.
However, the mansion state income tax credit does not begin until 2023, three years after the levy itself is implemented, according to the Hartford Courant.
Gov. Lamont’s office told the Courant, that the policy was basically a “penalty when people whose homes are valued over $2.5 million sell their homes and leave the state.”
The measure is only expected to raise $6.3 million per year.
Critics of the proposal argue that it sends the message to would-be entrants not to buy property in Connecticut.
Other tax provisions in the budget include an expansion of the state sales tax (6.35 percent) to cover things like interior design and laundry services, as well as parking and work safety apparel.
The state will impose a 10 percent tax on the wholesale price of e-cigarettes, a surcharge of 10 cent per single-use on plastic bags (before a complete ban), excise taxes on alcohol (excluding beer) will rise 10 percent and ride-sharing fees will increase to 30 cents per ride, from 25 cents.
The efforts to boost revenue come as the state faces the multi-billion projected deficit, as well as a massive gap in pension funding.
As previously reported by FOX Business, a number of prominent companies have left the state throughout recent years, including General Electric, Bristol Myers-Squibb and Alexion Pharmaceuticals.
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And individuals have fled, too.
As previously reported by FOX Business, of the moves conducted within Connecticut last year, 62 percent were outbound – the third highest of any state. Those with incomes of $100,000 or higher made up the largest share of exoduses.