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Democrats in the Connecticut legislature introduced three bills earlier this month that would raise property, capital gains, and income taxes in Senate Bill 101, Senate Bill 104, and House Bill 5133, respectively. On February 27, the legislature heard public testimony on all three bills, and it was clear that many opposed the radical increases in state taxes.
SB 101 would implement a statewide property tax on real estate valued at $3 million or more. Proponents of the bill frame it as a “mansion tax,” and argue that this tax only targets a small number of ultra-wealthy residents’ huge houses. However, this tax would also affect parcels with apartment buildings, meaning that the costs will be passed onto tenants over time in the forms of higher rent and higher mortgages. The mansion tax would be added on top of the existing property tax rather than replacing it. Los Angeles, California, a similar mansion tax implemented in 2023 has caused new housing developments to plummet by 40% within a year of its passage, whereas development in L.A.’s suburbs expanded. Because of the lack of new housing built, revenue projections far exceeded real returns.
Those in favor of a property tax increase may have forgotten that Connecticut already has the third-highest property taxes of any state, with an effective tax rate of 1.92% and $6,575 annual property tax on the median home value. Adding a state-level property tax would put immense pressure on municipal governments, many of which already rely on local property taxes for funding and would force them to find other sources of revenue by raising taxes somewhere else. Because more of their taxes are now paid to the state government, residents would see less of their money going to their communities.
SB 104 would levy an additional tax on capital gains for residents in the highest and second-highest income brackets. Federal law treats many gains realized by businesses as capital gains, so this surcharge would hurt small businesses whose owners seek to reinvest profit into their enterprise. If you would like to sell your business after spending decades creating and growing it, the state would take a large cut under this new legislation. In the longer term, this could discourage investment in entrepreneurship, constraining the state’s economy over time.
Capital gains revenue depends on financial markets, making one of the most volatile forms of tax revenue, seeing large returns during stock market surges and small returns during downturns. Relying more on capital gains taxes would therefore damage Connecticut’s fiscal stability.
Connecticut already has a relatively high top income tax rate of 6.99%, but SB 5133 would raise it to 7.99%, further endangering the state’s fiscal security. Progressives like to target the wealthy, but forget that the rich minority often provide a large portion of a state’s revenue, and that even a few of them leaving could jeopardize revenue projections. For example, a report from the Heritage Foundation found that millions of Americans have left their high-income tax homes for tax-friendlier states.
While Democrats may hail these bills as fairer and more equitable in terms of wealth redistribution, Connecticut residents should reconsider––for the sake of their state’s economy.
