Connecticut lawmakers debate proposed 1.75% capital gains tax surcharge for wealthy taxpayers

In a pivotal meeting held on April 23, 2025, the Connecticut Finance, Revenue, and Bonding Committee engaged in a heated debate over a proposed amendment to impose a capital gains surcharge. The amendment, which suggests a 1.75% tax on capital gains for high earners, has sparked significant discussion among lawmakers, reflecting the ongoing tension between revenue generation and economic growth in the state.

The proposed surcharge targets taxpayers with an adjusted gross income of $1 million for single filers and $2 million for joint filers, with a one-time exclusion for capital gains from the sale of primary residences or business interests. As the discussion unfolded, Senator Fazio voiced strong opposition, emphasizing Connecticut's status as one of the highest tax states in the nation. He argued that increasing taxes could deter job creation and investment, urging his colleagues to seek ways to reduce taxes for middle and lower-income residents instead.

Representative Polleta raised concerns about the anticipated revenue from the amendment, estimating it could generate approximately $284 million annually, although this figure might decrease due to exemptions. He echoed Fazio's sentiments, questioning the necessity of a new tax when the state is already grappling with affordability issues and potential federal funding cuts.

Supporters of the amendment, including Representative Doucette, highlighted the importance of addressing the financial needs of the state while ensuring that long-term residents and business owners are not adversely affected by the new tax. Doucette expressed gratitude for the inclusion of the one-time exemption, which aims to protect families who rely on their homes as retirement investments.

As the meeting progressed, the committee members grappled with the implications of the proposed tax on Connecticut's economic landscape. Many representatives voiced a collective concern that raising taxes could drive high earners and businesses out of the state, echoing past experiences where companies like General Electric relocated due to unfavorable tax conditions.

In conclusion, the committee's discussions reflect a broader debate within Connecticut about balancing fiscal responsibility with the need to foster a competitive economic environment. As lawmakers prepare for a final vote on the amendment, the outcome will likely have lasting implications for the state's financial future and its residents' economic well-being.