Income Inequality in Connecticut: How an Uneven Tax Burden Reinforces Disparities and Fails to Provide Opportunities to Low-Income Residents

April 2021

Income inequality has been on the rise in the United States for nearly half a century. Connecticut, like other northeastern states, has seen an especially dramatic increase in inequality, rapidly shifting from the 27th most unequal state to the 3rd in just 15 years. This paper analyzes the state government’s imperative to act by reviewing the factors leading to inequality (including geographic location and modernizing industries), the current state of inequality, and the current tax system in Connecticut and comparing this tax system to the recommendations for decreasing inequality made by economists and policy analysts. This analysis shows that the current regressive tax system and the policy decisions which have led to it may be in defiance of economists’ recommendations and are contributing to the rising inequality in the state. Additionally, the unique location of Connecticut next to the urban agglomeration economy of New York City and the concentration of wealth in neighboring Fairfield County, as well as recent research on the migration patterns of wealthy residents in response to taxes, suggests that a dramatically more progressive tax system may be successful in decreasing income inequality in the state. Implementation of the recommendations made by economists and policy analysts summarized in this paper is likely to lead to a more equitable distribution of income in the state and slow the dramatic rise of inequality seen in recent decades.