Why CT needs progressive budget (tax and spending) reform

CT Voices 

Complete report

 Progressive tax reform would support the state’s economy and working- and middle-class families, especially families of color. As detailed in CT Voices’ report on tax reform, Connecticut’s tax system is regressive, meaning the state’s working- and middle-class families, especially families of color, pay a higher percentage of their income in state and local taxes than the wealthy, which exacerbates the pre-tax wage inequality reviewed earlier. At the same time, Connecticut’s tax system slows economic growth by disproportionately burdening working- and middle-class families because those families spend a greater percentage of their income on economic goods and services than the wealthy spend—in economic terms, working- and middle-class families have a higher marginal propensity to consume (MPC). 

Put together, tax reform comprised of a child tax credit and an equal-sized tax on dividends and capital gains would be revenue neutral (i.e., it would not increase or decrease the state’s overall tax revenue when excluding the positive effect of the program on economic growth) and it would address the state’s main economic problems: it would boost the economy because the expansionary effect of the tax cut component is significantly larger than the contractionary effect of the tax increase component; and it would support working- and middle-class families, especially families of color, by decreasing their disproportionate tax burden.

Progressive budget (tax and spending) reform would provide even more support for the state’s economy and working- and middle-class families, especially families of color. Based on the fiscal multiplier effects detailed above, a budget that incorporates both progressive tax reform (i.e., shifts the disproportionate tax burden on workingand middle-class families to the wealthy) and progressive spending reform (i.e., shifts existing spending to programs that more directly benefit working- and middle-class families) would provide more support for Connecticut’s economy and working- and middle-class families, especially families of color, than a budget that incorporates only tax reform or spending reform. Progressive budget (tax and spending) reform along with an overall increase in tax and spending levels has the potential to provide the greatest support for the state’s economy and working- and midd

Both progressive tax reform (i.e., shifts the disproportionate tax burden on working and middle-class families to the wealthy) and progressive spending reform (i.e., shifts existing spending to programs that more directly benefit working- and middle-class families) would provide more support for Connecticut’s economy and working- and middle-class families, especially families of color, than a budget that incorporates only tax reform or spending reform. Progressive budget (tax and spending) reform along with an overall increase in tax and spending levels has the potential to provide the greatest support for the state’s economy and working- and middle-class families, especially families of color. 

A budget that, in addition to progressive tax reform and progressive spending reform, incorporates a progressive tax increase (i.e., increases the overall tax level through higher taxes on the wealthy) and a progressive spending increase (i.e., increases the overall spending level through higher spending on programs that support the neediest families) would provide more support for Connecticut’s economy and working- and middle-class families, especially families of color, than a budget that only incorporates some of these changes.