As the state income tax reaches its 30th anniversary, here's what you need to know about Connecticut

HARTFORD — Thirty years after an intense fight that led to creation of the Connecticut’s personal income tax, the levy has become the workhorse of the state budget — generating about 50% of the state’s general fund.

The tax has contributed directly to the largest rainy day fund in state history, which has been growing rapidly and is now projected at $4.77 billion. The emergency fund was literally at zero only 10 years ago, but it increased sharply after a bipartisan change in the law directed more money into the fund as Wall Street was setting records and generating increased tax revenues.

Democrats have argued for decades that the income tax has provided a steady and relatively stable stream of income — rather than seeing the sales tax go up and down as the economy improved or pulled back. Without the income tax, one of the alternatives at the time was raising the state sales tax as high as 12%.

The state has recently stabilized its finances when compared to the past, leading to the first bond rating increases in the past 20 years. In a major turnaround from past fiscal failures, four independent Wall Street agencies upgraded Connecticut’s bond rating in recent months after years of large deficits and financial turmoil.

Read more: https://www.courant.com/politics/hc-pol-state-income-tax-30th-anniversary-20210822-rmtp6dlf4jh43j2mn6aweqyrqy-story.html