Connecticut adjusts income tax brackets and thresholds for inflation through 2027

On April 9, 2025, the Connecticut State Legislature introduced House Bill 7272, a significant piece of legislation aimed at reforming the state's income tax structure. The bill proposes adjustments to tax rates and brackets, particularly targeting high-income earners and incorporating inflation adjustments for future tax years.

The primary objective of House Bill 7272 is to modify the existing income tax framework by introducing a tiered tax rate system for individuals and trusts. Under the proposed changes, taxpayers with an adjusted gross income exceeding $200,000 would face increased tax rates, with maximum payments reaching up to $2,700. For those earning over $500,000, an additional charge of $50 for every $5,000 over this threshold would apply, capped at $450. Trusts and estates would also see a tax rate set at 6.99% of their Connecticut taxable income.

A notable feature of the bill is its provision for annual adjustments based on inflation. Starting in 2026, the income brackets and thresholds will be recalibrated according to the percentage increase in the chained consumer price index, ensuring that tax rates remain relevant in the face of economic changes. This adjustment mechanism is designed to alleviate the tax burden on residents as inflation impacts income levels.

The introduction of House Bill 7272 has sparked discussions among lawmakers and constituents alike. Proponents argue that the bill is a necessary step toward a fairer tax system that addresses income inequality and provides a more equitable contribution from higher earners. Critics, however, express concerns that the increased tax burden on affluent individuals may drive them out of the state, potentially harming Connecticut's economy.

As the bill progresses through the legislative process, its implications could be far-reaching. Experts suggest that if passed, it may lead to increased state revenue, which could be allocated to public services and infrastructure. However, the potential for economic migration among high-income earners remains a contentious point of debate.

In summary, House Bill 7272 represents a pivotal shift in Connecticut's tax policy, with its focus on high-income earners and inflation adjustments. As discussions continue, the bill's fate will likely hinge on balancing the need for increased revenue with the economic realities faced by residents. The legislature is expected to deliberate further on the bill in the coming weeks, with potential amendments and adjustments based on stakeholder feedback.