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SB 123

AN ACT REQUIRING THE INDEXING OF INCOME THRESHOLDS FOR THE PERSONAL INCOME TAX.

2025 Regular Session Introduced by Ryan Fazio

Connecticut bill automatically adjusts personal income tax brackets annually for inflation to prevent bracket creep and stabilize effective tax rates without legislative action.

REF. TO JOINT COMM. ON Finance, Revenue and Bonding
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Bill Summary · SB 123

Legislative bill overview

SB 123 would require Connecticut to automatically adjust personal income tax brackets and thresholds annually based on inflation (typically using a cost-of-living index). This means the income levels at which different tax rates apply would increase each year rather than remaining static, preventing "bracket creep" where inflation pushes taxpayers into higher tax brackets without actual income gains.

Why is this important

Bracket creep effectively increases taxes on middle-class families over time without legislative action—as inflation rises, people earn nominally higher wages but pay proportionally more in taxes despite no real increase in purchasing power. Indexing thresholds would stabilize the real tax burden and reduce the need for periodic legislative adjustments to maintain tax brackets.

Potential points of contention

  • Revenue impact: Automatic indexing reduces state tax revenue growth, potentially affecting education, healthcare, and infrastructure funding unless paired with spending adjustments
  • Political control: Removes the legislature's annual opportunity to debate and adjust tax policy, shifting discretion to automatic formulas
  • Index selection: Disagreement over which inflation measure to use (CPI, wage growth, state-specific metrics) could significantly affect outcomes
  • Initial threshold levels: What baseline thresholds should indexing begin from, and whether current levels adequately reflect intended progressive taxation

Compiled from official sources — confirm details with the bill’s official record.

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