A special examination by Connecticut Comptroller Sean Scanlon’s office of the federal budget passed last month by Republicans and signed by President Donald Trump found that the law will hurt lower income residents while helping the wealthiest.
The document, which is accessible here, outlines how the law will impact Connecticut residents in varying tax situations. However, the report continued, most of the bill’s tax cuts are simply extensions of cuts first put in place in 2017, meaning much of the bill’s changes are already in place and many people won’t see their taxes change compared to what they paid last year.
The SALT cap will rise from $10,000 to $40,000 for the next four years, which is expected to mostly benefit higher-income residents. Additionally, an increase in the estate and gift tax will also benefit wealthy families.
Conversely, low-income residents will feel the impact most sharply, with serious cuts expected in access to health insurance and supplemental food assistance. As many as 200,000 people could lose insurance, while total estimates for the Supplemental Nutrition Assistance Program were not yet available.
Benefits are also expected to shrink for families receiving aid. The state itself is expected to also struggle under an estimated $1 trillion in national Medicaid cuts, which will likely cost the state $13 billion over the next decade and harm health care businesses.
“The law will have disparate impacts on different parts of the economy,” according to the report, with corporations poised to benefit from tax cuts and deductions. Health care and clean energy businesses, along with colleges and universities, will have more serious struggles, while higher interest rates will make borrowing more expensive, increasing the cost of mortgages and business loans.
Speaking of loans, one of the biggest losers in the budget will be student loan borrowers. That’s due to new changes to repayment plans, including fewer options for new borrowers and phasing out loan deferment and forgiveness programs. That could reduce applicants for many degree programs, especially more expensive ones like law or medicine, and will push loan holders to private ones that could have significantly higher costs.
Although new tax deductions will help some workers, these deductions only benefit taxpayers earning enough to owe federal taxes, meaning households earning below the standard deduction will not benefit.
Additionally, tipped workers will still owe payroll taxes on tips. The overtime change, meanwhile, is expected to support only specific workers in fields with frequent overtime like health care, manufacturing, retail and public safety.
Overall, the worst impact of the budget, the report found, comes from its expected $5 trillion increase to the national debt. This is expected to make borrowing costs for people and companies higher, reducing the strength of the overall economy. A trickle-down impact would lead the state’s borrowing costs to grow, further increasing municipal taxes, meaning costs for many residents would jump, eating into the tax savings some might experience.
