You asked why a single filer pays a higher state income tax at a given income level than a married couple filing jointly.

SUMMARY

The tax payment differential results from the interplay of several features of the Connecticut income tax. Like the federal and other state income taxes, Connecticut's income tax adjusts exemption and tax bracket thresholds for family size. Exemption and bracket thresholds for single filers are typically about half those for married couples filing jointly. The rationale for the differentials is that a single person's income supports only himself while a joint filer's income supports at least two people.

In addition, several specific features of the Connecticut income tax make the difference greater, particularly for single and joint filers with Connecticut adjusted gross incomes (CT AGI) below $ 50,000. These features include not only the amount of exempt income for each type of filer and their personal credit amounts, but also the fact that the exemption and personal credits phase out as income increases. The tax differential between single and joint filers is much smaller at higher income levels because the exemptions and personal credits do not apply to those taxpayers.

This report describes the various features of the Connecticut income tax that affect the tax differential and shows how they affect hypothetical single and joint filers at five income levels. The figures given are for the 2005 income tax year, for which taxes are due on April 17, 2006.

FILING STATUS

Like the federal and other state income taxes, the Connecticut income tax varies according to filing status. Filing status is a way of adjusting the tax liability of taxpayers with the same taxable income based on family size. Thus, Connecticut requires filers to use one of four categories based on their family situation. The categories are: single, married filing jointly, married filing separately, and head of household (i. e, one adult with at least one dependent). Single filers and married people filing separately are treated the same in most cases. This report considers two types of filers, single and joint, using figures for the 2005 tax year.

TAXABLE INCOME

Connecticut's income tax is linked to the federal income tax and uses federal AGI as its starting point. The tax requires several additions and subtractions to federal AGI to arrive at Connecticut AGI (CT AGI), which is used to figure income subject to state income tax (Connecticut taxable income). For each type of filer, a certain amount of CT AGI is exempted from taxable income. For joint filers, the first $ 24,000 of CT AGI is exempt; for single filers the exemption is $ 12,625. People with CT AGIs below these levels are not taxed.

These exemptions are gradually reduced at higher income levels until they are completely eliminated. For joint filers, the reduction starts when CT AGI is over $ 48,000 and the exemption is eliminated for those with CT AGIs over $ 71,000. For single filers, the reduction starts when CT AGI is over $ 25,250 and the exemption is eliminated for CT AGIs over $ 37,250.

TAX RATE

The Connecticut income tax has two income brackets and two tax rates, depending on the amount of taxable income. The rates are 3% and 5%. The rates increase for taxable income that exceeds specified income thresholds, which vary by filing status. Thus, the first $ 20,000 of joint filers' taxable income is subject to the 3% rate while taxable income over

$ 20,000 is taxed at 5%. For single filers, the 3% rate applies to the first $ 10,000 of taxable income and the 5% rate applies to taxable income over that level.

PERSONAL CREDIT

Although tax is figured using the taxable income thresholds and rates described above, the amount a taxpayer actually pays may be offset by personal credits of up to 75% of the tax due. Like the exemptions described above, the credits are gradually reduced at higher income levels. For joint filers, the credit reduction starts once CT AGI exceeds $ 30,000 with no credit given once CT AGI exceeds $ 100,500. For single filers, the corresponding CT AGI levels are $ 15,750 and $ 55,000.

TAX CALCULATION EXAMPLES

The interaction of these tax features are reflected in the Tables 1- 5 below.

Table 1: CT AGI = $ 20,000

Taxable Income: 3% Rate - First $ 10,000 Single, $ 20,000 Joint

5% Rate – Over $ 10,000 Single, Over $ 20,000, Joint

Table 2: CT AGI = $ 35,000

Taxable Income: 3% Rate - First $ 10,000 Single, $ 20,000 Joint

5% Rate – Over $ 10,000 Single, Over $ 20,000, Joint

Table 3: CT AGI = $ 50,000

Taxable Income: 3% Rate - First $ 10,000 Single, $ 20,000 Joint

5% Rate – Over $ 10,000 Single, Over $ 20,000, Joint

Table 4: CT AGI = $ 80,000

Taxable Income: 3% Rate - First $ 10,000 Single, $ 20,000 Joint

5% Rate – Over $ 10,000 Single, Over $ 20,000, Joint

Table 5: CT AGI = $ 150,000

Taxable Income: 3% Rate - First $ 10,000 Single, $ 20,000 Joint

5% Rate – Over $ 10,000 Single, Over $ 20,000, Joint

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