FAQs: Proposal to Shift a Portion of CT’s Income Tax to a Payroll Tax

This frequently asked questions document addresses many of the questions that have been raised surrounding the payroll tax proposed and designed by the Connecticut School Finance Project, which would serve as a partial replacement for the state income tax and help reduce individual and business tax burdens as well as mitigate the impact of recent federal tax changes on Connecticut taxpayers.

The total estimated savings on federal taxes to Connecticut taxpayers (individuals and businesses) under this proposal is, conservatively, $2 billion. Under the payroll tax proposal, approximately $1 billion in federal savings would accrue to Connecticut residents as a result of reduced federal income tax and FICA liability (much of which would likely be reinvested in the Connecticut economy), $600 million in federal tax savings would accrue to Connecticut businesses as a result of reduced FICA liability, and $400 million in federal tax savings would be “recaptured” by the State of Connecticut as increased revenue.

More details about these estimated savings and the payroll tax proposal are available in the FAQ document.