HOW TO ELIMINATE THE CT STATE INCOME TAX

by Betsy McCaughey Monday, February 23, 2026

The income tax depresses growth. Phasing it out does more than save taxpayers the money they otherwise would have to pay on their income. It boosts their pre-tax income and expands their economic opportunities.

Eliminating Connecticut’s state income tax will send business startups soaring 21% to 26% and increase the average wage earners pay by $6547 to $6743, according to a new report from the President’s Council of Economic Advisors. (1) The Trump administration is making a major push to promote state income tax elimination in order to spur economic growth.

Naysayers whining that eliminating the income tax will leave a huge hole in the state budget, forcing draconian service cuts and widespread suffering, ignore the burst in overall economic activity and population inflows that result from launching tax reform.

There are many places in the state budget that need cutting, and I will do that. But what I am proposing is not an austerity plan. It is a growth plan. Every one percent cut in the income tax will produce a much larger increase in state GDP per capita, economists predict. (2)

This plan is gradual, stable, and fiscally responsible. No hike in property taxes to compensate, no nasty surprises. It duplicates the legislation being adopted in several other tax-cutting states that are going to zero.

The naysayers forget the disastrous impact that adopting the income tax in 1991 had on the state. By 2012, Connecticut’s population relative to the other states had steadily fallen, as people voted with their feet against the tax. The out-migration was huge and continues.

In 1991, we were told the tax would be temporary. But as President Reagan warned, “a tax created in a crisis becomes part of the permanent structure of government.” The results were the same for the other ten states that adopted the income tax over the last 50 years. Each one suffered a relative loss of population, and their economies have underperformed states without an income tax. (3)

Given this undeniable evidence, it is no surprise that some states are heading toward full elimination of the income tax. Undoing the damage. Kentucky led the way in 2022, and Mississippi and Oklahoma are following the same principle: Their statutes all say that the first and only use of any surplus funds will be to reduce income tax rates.

The Oklahoma model, the best in my view, requires rate cuts every time revenue levels grow 5%, affording the legislature no discretion to find ways they would rather spend the money. A revenue increase is an automatic trigger. (4) Spending must be frozen, and the tax rate must be slashed.

South Carolina is enacting the same type of legislation right now. The bill, already enacted in the lower house, is now passing through the state senate with the Governor committed to signing it. South Carolina has the highest personal income tax rate in the Southeast but will head toward zero. (5)

These states are providing a roadmap for a stable, fiscally responsible elimination of the income tax in a way that spurs real growth in the state, not severe austerity. Spending is kept at current levels but not increased. My bill will be modelled closely after this legislation.

HOUSEHOLD DEBT AS URGENT AS STATE DEBT

Defenders of the Connecticut status quo will insist that the state cannot eliminate its income tax because the state indebtedness is so high. My answer is politicians should be as concerned with how Connecticut households are struggling to pay their own indebtedness.

People are lying awake at night worried about their mortgage, their car loan, or paying off their credit card debt. The average household in Connecticut owes $181,968 according to a recent WalletHub survey. That is among the highest household debt in the US.

Consumer debt increased last year, a sign residents are struggling financially and borrowing to pay for necessities. (6)

I want to eliminate the income tax to help them.

Eliminating the income tax will produce a burst in overall economic activity, a surge in population and businesses coming into Connecticut instead of leaving, and a raise for every working, taxpaying person in this state.

No state is doomed to economic failure: A staggering 54% of corporate CEOs say they are “open to examining new locations” based on taxes, energy costs, regulation, and workforce availability.

It is time for Connecticut to compete.

THE HIGH-SPEED ALTERNATIVE TO PHASING OUT THE TAX

Phasing out the income tax by relying on revenue increases to trigger rate reductions will take time, depending on the pace of overall economic growth.

There is an alternative, and it is up to the people of Connecticut to make the choice. The Council of Economic Advisors proposes that by hiking the sales tax on all goods and services except rentals, other housing, and groceries, to 8.77% while also freezing spending at current levels, the income tax could be eliminated immediately instead of over several years. That figure, 8.77%, is probably a low ball, according to the Tax Foundation. I am inclined to agree.

This alternative is faster, and therefore more effective but will meet resistance from those reluctant to increase sales taxes. It is the voters’ choice.

FOOTNOTES

1. “The Economic Impact of State Income Tax Elimination,” The Council of Economic Advisors, Office of the President of the United State, January 2026.

2. Mertens, Karel and Morten O. Ravin, “The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States,” American Economic Review 103, no. 4, (2013) 1212-1247.

3. Dr. Arthur B. Laffer, Stephen Moore, Rex Sinquefield, et al, An Inquiry into the Nature and Causes of the Wealth of States, pp. 14-16.

4. American Legislative Exchange Council, “How State are Eliminating the Personal Income Tax.”

5. “South Carolina Moves Closer to Zero Income Tax,” SouthCarolina Policy Council, May 9, 2025.

6. Wallet Hub

PAID FOR BY BETSY 2026, DIANA COLWELL, TREASURER