Substitute House Bill No. 5444 proposes significant amendments to Connecticut's personal income tax structure, focusing on indexing tax thresholds and exemption amounts to inflation. The bill repeals subsection (a) of section 12-700 of the general statutes and introduces a new framework for tax rates applicable to various income brackets based on filing status, effective for taxable years starting January 1, 2024. Key changes include a progressive tax structure with rates starting at 3.0% for lower income brackets and increasing to 6.5% for higher income levels, while the tax rate for trusts and estates is set at 4.5%. The bill also establishes specific income thresholds for different filing statuses, with additional charges for high-income earners, thereby aiming to create a more equitable tax system.

Furthermore, the bill modifies personal exemption amounts for taxpayers based on their adjusted gross income (AGI), with provisions for annual adjustments starting January 1, 2028, based on the chained consumer price index. For instance, the personal exemption for single filers is set at $15,000 with a threshold of $30,000, while for married couples filing jointly, it is $24,000 with a threshold of $48,000. The bill deletes previous language that did not account for inflation adjustments, ensuring that the tax code remains responsive to economic changes. Overall, the proposed changes are designed to alleviate the tax burden on lower-income residents while increasing contributions from higher-income individuals, with a projected revenue loss of approximately $18.8 million in FY 28, potentially escalating in subsequent years.

Statutes affected:
Raised Bill: 12-702
FIN Joint Favorable Substitute: 12-702
File No. 667: 12-702