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New York Times, April 9, 2008: Income Gap in Connecticut Is Growing Fastest, Study Finds

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By ALISON LEIGH COWAN

STAMFORD, Conn. Marie Wendorff knows better than most about Connecticut۪s economic contradictions.

By age 38, Ms. Wendorff had accumulated the trophies of suburban life: a picturesque 3,800-square-foot Colonial house in Wilton, membership in the local country club, a ski house in Windham, N.Y., and a 24-foot boat docked in Long Island Sound. But a messy divorce in 2004 pushed her into bankruptcy.

On the same day in the summer of 2005 that she applied for food stamps, she was invited to attend a friend۪s birthday party on a yacht.

“It۪s like two different worlds,” said Ms. Wendorff, a mother of three who has struggled to keep her family afloat amid a sea of wealth.

Like Ms. Wendorff, Connecticut is straddling those worlds. According to a new study by two groups based in Washington, the Economic Policy Institute and the Center on Budget and Policy Priorities, the income gap between the have-lots and the have-nots is widening faster in Connecticut than in any other state.

Adjusting census data for inflation, the study compared average family incomes from 2004 to 2006 with those from 1987 to 1989. In Connecticut, income increased by $52,439, or 45 percent, for the top fifth of Connecticut households, while the bottom fifth۪s income dropped $4,437, or 17 percent.

The study, released on Tuesday, also found that Connecticut is the only state in the nation where the poorest 20 percent of people lost real ground over the last 20 years (the loss in Rhode Island, $992, or 5 percent, was deemed statistically insignificant).

Nationally, the study showed that the incomes of the richest 20 percent rose an average of 36 percent in the last two decades, while those of the poorest 20 percent rose 11 percent.

Higher income at the upper end and lower income at the bottom meant that Connecticut۪s rich earned 8 times as much on average, as its poor, up from 4.6 times when measured two decades ago. Nationally, the gap was 7.3 times between 2004 and 2006, up from 6 times two decades earlier.

New York had the highest income gap among the 50 states in 2004 to 2006, according to the study, with the top fifth earning an average of $148,200 a year, or 8.7 times the $17,100 income at the bottom. Connecticut ranked seventh and New Jersey, where the rich earned 7.5 times what the poor did, was 14th. (The rankings did not include Washington, D.C., which had by far the biggest income gap, with the rich earning an average of $188,500, the highest income in the country, 13.5 times the poor۪s $14,000 average.)

The study۪s authors adjusted family income for federal taxes but not state and local taxes. So the study may not accurately capture the gap in high-tax states like New York that tax high earners for the benefit of those who are struggling.

And the study ended in 2006, well before problems in the subprime mortgage market roiled the stock market and swept away some of the fortunes and jobs of those reaping the benefits of a strong economy.

The authors said that they hoped to use the report to advance policies like raising income taxes rather than sales taxes or sin taxes, which tend to be regressive that might reduce income inequality. They also favor indexing the minimum wage to inflation, increasing eligibility for unemployment insurance and expanding the earned-income tax credit to give lower-income families a break on state taxes.

“Connecticut has attempted 28 times to enact an earned-income tax credit,” said Doug Hall, the associate research director of Connecticut Voices for Children, an advocacy group in New Haven that issued a companion study to the report. He said that Connecticut۪s lower-income families struggle because they must compete with extremely wealthy families for basic commodities like gas and housing.

“In Connecticut, things like rent and groceries will be inflated because of that supercharged economy, because of those high incomes that are driving that economy,” he said. “We remain the only state in New England with an income tax that does not have an earned-income tax credit.”

Mary-Jane Foster, owner of the Bridgeport Bluefish, a minor league baseball team, whose family is in that top fifth of families in Connecticut earning more than $169,000 a year, said she supports the earned-income tax credit and a minimum-wage hike, though she worries that Connecticut “is already perceived as one of the most burdensome environments for starting a business,” which can make it difficult to create good jobs there.

“I think the gap between the rich and poor is an issue for everyone,” Ms. Foster said. “Ultimately, our suburbs thrive only if our cities thrive.”

State Senator William H. Nickerson, a Greenwich Republican, said that closing the income and education gaps in Connecticut is a critical issue, but he rejected the idea that raising taxes on the wealthy is a solution.

Mr. Nickerson said that the 70,000 Connecticut households with the highest incomes now pay as much in state income tax as the other 95 percent of the state۪s households. “It۪s an immensely top-heavy tax,” he said, adding that increasing taxes on the rich simply “won۪t remedy the problem.”

Nancy Kail, who helped found the Greenwich Alliance for Education, a foundation that works to correct some inequities in public schools, said that the growing income gap “translates into other gaps like achievement gaps in school or success gaps.”

“It۪s bad news for all of us, and in a town like Greenwich, which is resource-rich, it۪s shameful that it exists,” Ms. Kail said. “It۪s a community responsibility to do something about it.”

Kristen Pavlik, 26, was the first in her family to attend college and is now a counselor at a domestic-violence shelter in Norwalk. She moonlights doing clerical work and tutoring. Ms. Pavlik said that living among “the extreme wealth” in Connecticut constantly tests her resolve: She must wait until midmonth, for her second paycheck, to buy groceries, and struggles to have $100 left after rent, utilities, gas and car payments. It helps that her mother, who lives nearby in Waterbury, often provides packages of frozen homemade meals.

“The thing that is stressful is it۪s not always easy for me to put things away in my savings,” she said. “God forbid I ever had an emergency.”

Greg Hladky contributed reporting from New Haven and Ken Belson from New York.

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