Conn. mulls new tax system

The Connecticut State Capitol

The Connecticut State Capitol

From Robert Whitcomb’s “Digital Diary,’’ in

Connecticut Gov. Ned Lamont and that state’s legislative leaders are considering replacing most of the state income tax with a payroll tax, though apparently not this year.

It would be a complex plan but the core of it seems to be to have employers pay a 5 percent state payroll tax on all wages and salaries. The assumption is that employers would cut pay by 5 percent to make themselves whole. This, it is argued, would end up reducing the amount that employees must pay in federal income tax and Social Security and Medicaid taxes. Behind this is, among other things, the state trying to find ways to offset the effects of the $10,000 limit on state and local tax deductions (targeting mostly Democratic-run states) set by the Republican tax law of 2017 as well as to replace most of the Connecticut income tax.

Officials in neighboring states will, I assume, be watching to see what, if anything, happens with these Connecticut tax-reform ideas. In any case, the 2017 tax law will force numerous adjustments in state and local taxes in various places over the next few years.