The Radical Plan–Replacing Income Tax With Payroll Tax

From Dan Haar, Hearst Media:

Democrats including Gov. Ned Lamont are preparing to replace most of the state income tax with a payroll tax, a new way to raise cash for the state that would mark the most radical change in Connecticut finances since the income tax started 28 years ago.

The plan would mean a tax cut for every person who works in Connecticut, at least in theory.

At its heart, it’s a simple idea: Employers would pay a payroll tax of 5 percent on all wages and salaries. They would, presumably, cut employees’ pay by 5 percent to make themselves whole.

The key is that employees would make 5 percent less, reducing federal income taxes as well as Social Security and Medicaid taxes for them and their employers. Most would be free of the state income tax, and those who now pay more than 5 percent would pay the difference, perhaps with the state taking some of their new savings.

… The stumbling block is in the many complications on the path to making the plan work–not politics or ideology.

Full story here.