As we’ve been reporting here at State of Disparity, Connecticut continues to have one of the widest gaps in the country between its wealthy and poor residents.
This past weekend, an art show by students and graduates of Stamford’s public schools explored the question “what is inequality?”
Craig LeMoult spoke with some of the artists.
New U.S. Census data out Thursday says Connecticut continues to be among the most unequal places in the country – behind just Washington, D.C. and New York.
Inequality is measured on a scale called the Gini Index. In the scale, a score of 0 would indicate a community is perfectly equal, meaning there’s a completely proportional distribution of income. A one one the Gini Index would mean a community is totally unequal – so one house would have all the income and everyone else would have nothing.
According to the new American Community Survey data, the level of inequality in Connecticut may have slightly increased, with the Gini Index going from .492 in 2012 to .499 in 2013. But the increase is within the margin of error, so it’s not statistically significant. This data map from the Connecticut State Data Center compares levels of inequality around the country, and the chart at the bottom compares them to inequality around the world.
A map of inequality rates from 2012 is online here.
The new data show the percentage of people living in poverty in Connecticut remained steady from 2012 through last year, mirroring national statistics. 10.7 percent of Connecticut residents are living in poverty.
Nationally, 48.8 million people, about 16 percent, lived in poverty last year. A family of four is considered to be living in poverty if it brings in less than $23,830 in a year. For an individual, the number is less than $11,890.
In Connecticut, the median household income edged down slightly in 2013, to about $67,000 from $68,000 the year before. That’s still significantly higher than the national median amount – which was about $52,000 last year.
Connecticut’s rising income disparity is causing the state’s revenue from taxes to grow more slowly and to become more volatile. That’s according to a report from the credit rating agency Standard & Poor’s.
“Connecticut has the unenviable position shared by only three other states in the nation where it is in the top 10 of the most unequal in terms of income distribution, and in the top 10 most volatile in terms of revenue performance,” said Gabe Petek, a credit analyst with S&P.
Petek says those two things are related. Because of Connecticut’s increasing reliance on tax revenues from people at the top of the economic spectrum, the state budget winds up fluctuating with the markets.
Standard & Poor’s is looking into this issue out of an interest in states’ abilities to pay their debts. Since 2003, the S&P bond rating of Connecticut has remained at double-A, indicating a very strong capacity to meet financial commitments.
“If the state budget makers agree on a budget and then revenue comes in 5 or 10 percent below what they assumed when they set the budget, they have a real crisis on their hands, and we saw that during the great recession,” said Petek.
In addition to increasing volatility, Connecticut has seen the growth of its tax revenue slowing down. It hit a high of 10.8 percent in the 1980s and since 2009 has gone down to 7.3 percent.
Petek says New York is among the states with the greatest inequality, but it doesn’t have as much tax volatility as Connecticut.
He says that’s because New York has a broader income base with a higher share of revenue coming from wages and salaries, compared to Connecticut, which relies more heavily on capital gains taxes. S&P boosted New York’s bond rating to double-A plus in July – slightly higher than Connecticut and the highest the state has been rated since 1972.