Any law that aims to change taxes is a matter of interest. As a resident in Connecticut, you may want to take notice of the proposed payroll tax being worked out currently by state representatives. According to Tax Foundation, this new tax law aims to do away with income tax for most taxpayers. Instead, the law will institute a payroll tax.
As it stands, the idea is to put into place a five percent payroll tax for most employees. There would be an added two percent tax for those earning over $200,000. In addition, the earned income credit would go up. Business owners can deduct the tax as an expense, and if you have the state and local tax deduction cap, you would get a federal tax cut.
As with any proposed change, there are some issues being raised. You may wonder how taxing non-wage income will work. After all, if you get payments of some type other than through working and you pay taxes on them, you do not have an employer to handle the payroll tax. The main idea now is to treat this like self-employed earnings.
Employers have concerns because their costs for employees will go up. Some have suggested that employers will cut employee wages to offset the payroll tax for the employer. In situations where this is not feasible, layoffs may be the only answer to keep businesses close to the margin from closing.
A change this dramatic will have a substantial impact on employers and employees. The economy of Connecticut may shift in ways that the government and tax experts are not expecting. The key will be to remain informed and make the necessary changes to protect your interests.
This information is for education purposes only and is not legal advice.