Starting on Aug. 1, the state will begin to capture the boost in the income tax for 2011 approved by lawmakers in May, which is retroactive to the beginning of the calendar year.
Single and joint filers earning $50,000 a year will see about $200 in additional withholding through December, as will joint filers earning $100,000. Single filers making $100,000 will see about $605 disappear from their paychecks.
It starts to jump up for joint filers at the $125,000 level when $510 in additional taxes will be taken out to make up for the seven months that the new rates were in effect, but not yet collected.
At the top end, if your adjusted gross income is $1 million, by the end of December, you will have contributed $17,400 more to the state of Connecticut, while those hauling in $2 million in salary, will send in some $19,400 in additional taxes.
"You are going to see a bit of a jolt in August, but it falls again in January," said Sarah Kaufman, spokeswoman for the state Department of Revenue Services, as the new rates are again spread out over 12 months, rather than five.
Kaufman said the department has been reaching out to businesses since May and alerting payroll companies in particular about the changes.
"We also have had a lot of people contacting us. Most employers became aware of the new tax tables shortly after the legislation went into effect," she said.
Kaufman said they notified the Connecticut Business and Industry Association and the National Association of Computerized Tax Professionals on the income tax adjustments, as well as the Connecticut Retail Merchants Association on the sales tax changes.
Lawmakers made the income tax more progressive by adding three new brackets. The six marginal tax rates now range from 3 percent to 6.7 percent, which at the top end is .2 percent higher than what was in effect last year. This will still be lower than New York when it soon readjusts its highest bracket.
Of the 1.45 million taxpayers in the Connecticut, according to the Office of Policy and Management, the biggest portion, 77 percent, fall into the 5 percent and 5.5 percent tax brackets, which ranges in adjusted gross income from over $20,000 to $100,000 for joint filers.
A boost in the sales tax, which now covers a slew of new items, is 6.35 percent up from 6 percent, the first change in two decades and the first thing residents ran up against since they went into effect in July and covered such things as clothing under $50 and manicures.
The biggest impact of the income tax changes will be felt by those making more than $250,000 as they pay almost 66 percent of the tax, according to the state Office of Policy and Management.
Nancy Andrews, spokeswoman for the CBIA, said they have put out information on the changes to try to make sure their members are informed of how this will effect their businesses.
Andrew Markowski, the state director of the National Federation of Independent Business, said "our members are furious" about the boost in taxes since the majority of small businesses are limited liability corporations subject to the income tax.
"The bottom line is most of these businesses operate on very thin margins. This will impact how they plan for next year and beyond. Long-term calculations could mean relocating out of state," mainly down South, Markowski said.
Fred Carstensen, an economics professor at the University of Connecticut, said the marginal tax rate changes in Connecticut are fairly small.
"Increased taxes in general have a relatively small impact on people's behavior in the short run," although that could change long range. Right now, he said people migrate from Connecticut to Massachusetts and New York all the time despite their higher taxes.
"Taxes are not as powerful a motivator as some would like to claim," Carstensen said. He said the biggest impact of the increased taxes in Connecticut is that it mitigates against service cuts and massive layoffs.
Malloy has threatened to eliminate 6,500 jobs, which could mean more than 4,300 layoffs if he doesn't get $1.6 billion in savings from state workers. A positive vote on a concession package is now more likely since the State Employees Bargaining Agent Coalition revised its bylaws and a clarified deal is soon going back out for a second shot at approval.
Cartensen has said adding to the state's 9.1 percent unemployment rate will only delay the state's economic recovery. The tax package, along with the $1.6 billion concession package and other agency cuts, were approved to close the estimated $3.5 billion deficit this year that the new administration, led by Gov. Dannel P. Malloy, faced as it took office in January.
The $40.1 billion, two-year budget was adopted ahead of schedule in May with the new income tax rates projected to raise $1.2 billion over two years.
This year's red ink was caused by dropping revenues from the 2008 recession, the end of one-time federal assistance and the emptying of the state's rainy day fund.
Kaufman said the new tax tables will hopefully make sure that residents are withholding enough so they are not hit with a surprise state tax bill next year.
People who are self-employed have to go back and look at what they already paid in past quarters, apply the new rate and make up the difference in the next two quarterly payments, Kaufman said.
Markowski said for big businesses, the tax work is farmed out, but for the small guy, he is stuck figuring it out.
"Their most valuable asset is their time and this takes away from their time," he said, as he pointed to the four-page document that details how to apply the new eight-page tax tables.