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Connecticut Pays Highest Taxes, Experts Say

FAIRFIELD COUNTY, Conn. – If you live in Fairfield County, yet another national report could be the economic straw that breaks the camel’s back. And this time it involves everyone's least favorite subject – taxes.

Connecticut has the highest taxes of any state in the country, and there's no escaping next door — the surrounding states of New Jersey, New York and Massachusetts round out the top four highest taxed states.

The report by Bloomberg on Yahoo.com is based on information gathered by the Tax Foundation, which annually releases state-local tax burdens across the country.

The latest report comes after months of national reports and studies showing the region and state among the worst in traffic congestion, air pollution, high gas prices and alcohol abuse. Another report found that five Fairfield County towns have the least affordable housing prices.

“High taxes in Connecticut are paired with the nation's highest income per capita — $56,001 per person in 2010, according to the Bureau of Economic Analysis,” the report states.

“A sales tax increase took effect in July, raising the rate, from 6 percent to 6.35 percent, and adding a further 3 percentage-point levy on luxury goods such as expensive cars and boats. The state collects the third-highest property taxes per capita at $2,381, and is one of 14 states to tax Social Security income."

It also states that Connecticut’s inheritance tax is 7.2 percent to 16 percent with a $2 million exemption.

“I don’t really think this comes as any great surprise to anyone, and if it does, it shouldn’t,” said Paul Timpanelli, president and CEO of the Regional Bridgeport Business Council. “We have known for some time now that Connecticut is among the least business friendly states in the country, and high taxes are right up there at the top of the list as reasons why.”

Local tax associations that fight higher taxes in their towns say the latest report confirms what they already knew.

“Everyone knows that Connecticut is the highest in terms of taxes, and that Fairfield County is the hardest hit of all,” said Kate Daniello, who helped co-found “We the People of Fairfield” in 2008 to fight rising local taxes.

Daniello, who has lived in Fairfield since 1984, said high taxes are forcing people to move out of Connecticut.

“We’re getting hit on all sides,” Daniello said. “This is just another message that something needs to be done, and spending at all levels of government needs to be reduced. It’s gotten to the point where taxes are so oppressive people can’t afford to live here.”

But Joseph McGee, vice president of the Business Council of Fairfield County in Stamford, said while taxes in Connecticut are high, he believes the Tax Foundation’s rankings are “unfairly skewered” by the fact they include in its formula the taxes homeowners pay for out-of-state homes.

“In wealthier states like Connecticut, New York and New Jersey, where many people own  property out-of-state, taxes are counted for any property you own – even if it’s not in the state where you reside,” said McGee. “I believe this factor skewers the report’s results.”

McGee cited another report: “Total State and Local Business Taxes: State-by-state estimates for fiscal year 2010-2011,” which ranks Connecticut as one of the least taxed states in the nation regarding businesses taxes. The study was prepared by the Quantitative Economics and Statistics Practice of Ernst & Young LLP in conjunction with the Council on State Taxation (COST).

According to the Bloomberg report “States facing shrinking revenues (such as Connecticut) approved $23.9 billion in new taxes and fees in 2010.”

Connecticut imposed a further $6.2 billion in taxes in 2011 and proposed $13.8 billion in new taxes for 2012, according to the National Association of State Budget Officers.

"Many jurisdictions, many states, many counties, are broke," Carol Kokinis-Graves, senior writer analyst at Riverwoods (Ill.)-based tax and accounting firm CCH, a Wolters Kluwer business, told Bloomberg. “Along with cutting services, states are getting creative in finding additional revenues.” She cited taxes on yoga classes and “lots more ‘sin’ taxes.”

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