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    Wednesday, June 12, 2024

    Consider more tax relief to keep retirees in state

    United Van Lines garners news media coverage annually by publishing a report filled with statistics about the people who use its moving services, including the primary reason they relocated. Among those who utilized the company in Connecticut, and who cited retirement as their main motivation, 7% moved into the state and 33% left it, according to the most recent report.

    While that data is not scientific, it seems about right. Anyone who has long lived in Connecticut knows someone who has moved elsewhere after retiring, either relocating fulltime or for much of the year.

    The 2020 census showed the prior decade was a stagnant one for the state, the population “growing” an anemic 0.9% to about 3,606,000. Lower birth rates and the loss of older middle-class, and largely white residents from Connecticut’s suburbs — either to death or retirement relocation — were offset by higher birth rates in some urban centers and by population growth in Fairfield County.

    Climate is a prime motivation for many of these retirees to move south. Connecticut winters are long and cold. Politicians cannot legislate changes in the weather.

    But state lawmakers can, and recently have, addressed another factor that motivates retirees to flee — taxation.

    Until recently, Connecticut had among the most unfriendly tax structures for those entering retirement, a reality that has motivated retirees to relocate to states where the income from their pensions, social security, and retirements will not be taxed, or at least taxed as severely.

    Recent changes approved by the General Assembly and signed by Gov. Ned. Lamont have improved things. Social Security, pension and annuity income is now fully income-tax exempt for single taxpayers with federal adjusted gross income of less than $75,000 and for married taxpayers filing jointly with AGI of less than $100,000. Taxpayers who exceed these thresholds can deduct 75% of their federally taxable Social Security benefits.

    From her powerful position as co-chair of the Appropriations Committee, state Sen. Cathy Osten, D-Sprague, is now pushing for the state to go further in helping retirees stretch their retirement dollars. Her goal, said Osten, is exempting all retirement income from taxation.

    Osten is on the right path.

    While it is true expanding tax exemptions for retirees, or eliminating them entirely, will mean a revenue loss for the state, lawmakers should not view that fact in a vacuum. If a better tax environment persuades more retirees to remain in the state, it means the wealth they generated over their careers

    will remain here as well. That will translate into more dollars for state and local economies and increased sales tax generation.

    The United Van Lines data also had good news for Connecticut. Among those whose primary motivation was family, 41% were moving into Connecticut, 27% heading out. Of those who cited job opportunities for moving, 38% were inbound into the state, just 21.5% outbound. Among all those relocating, 40% were heading into Connecticut, 60% out.

    If tax relief can persuade more retirees to stay in Connecticut, or even move here to be near family, the state could reverse trends that have seen its population stagnate. That is a goal both major parties should support.

    Any tax relief for senior citizens should be part of a larger discussion about tax fairness. That discussion should include whether to make the recent income tax credit for low- and middle-income families permanent or approve an overall state income tax rate reduction.

    At the very least, the legislature should eliminate the fiscal cliff that now exists for retirees. Concerning pension and annuity income, if an individual earns a dollar over the $75,000 cut off, or a couple earns a dollar over the $100,000 figure, they get no tax break at all. A graduated phase out of the tax break would be fairer.

    After years of budget crises, state finances are now in decent shape, with a $2.8 billion surplus projected for the fiscal year ending June 30. The legislature should not be reckless. Tax cuts too large could plunge the state budget back into trouble. But, building on the positive changes from the last legislative session, the General Assembly should explore further tax relief. Motivating retirees to keep themselves and their wealth here is a good place to start.

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