The Republican minority in the Connecticut House of Representatives took a step toward compromise Monday with Gov. Ned Lamont, pitching a middle-class income tax cut worth up to $350 per filer and a new option to pay for it without jeopardizing other state programs.
But given that the Democratic governor is asking lawmakers only to approve a one-time rebate, rather than tax cuts that would provide relief year after year, that proposal’s fate remains uncertain.
“It’s no secret up here in Hartford that we hear from municipal leaders all the time about how overtaxed their residents are, especially as it relates to property taxes,” Rep. Joe Polletta of Watertown, ranking House Republican on the Finance, Revenue and Bonding Committee, said at a morning press conference.
The state income tax includes a credit that offsets up to $300 of municipal property tax burdens for single filers making less than $109,500 per year and couples earning less than $130,500.
House Republicans called Monday for the maximum credit to grow to $650, which would cost the state an estimated $275 million per year.
That’s less than the $700 bump up to a maximum credit of $1,000 the caucus recommended last October. That would have cost the state an estimated $500 million per year in tax revenue.
Aggressive budget caps enacted in 2017 have forced lawmakers to save an average of more than $1.8 billion each year since then, which represents 8% to 9% of the General Fund. And with analysts estimating the state will close the fiscal year June 30 with about $1.8 billion unspent, tax-cutting proposals from both Republican and Democratic legislators are plentiful this year.
Connecticut has been using those extra dollars to reduce its pension debt, which still exceeds $33 billion and ranks as one of the largest, per capita, in the nation.
But Lamont, a fiscal moderate, has cited several other reasons why lawmakers should be cautious about pledging ongoing relief this year.
- Deep federal budget cuts are expected to reduce Medicaid and other aid to Connecticut by hundreds of millions of dollars next fiscal year.
- Lawmakers hope to find hundreds of millions of dollars at the fiscal year’s end to invest in a new initiative to expand affordable child care and to expand education aid to cities and towns.
- And the global economy has grown increasingly unstable since the U.S-Israeli war with Iran began Feb. 28.
But House Minority Leader Vincent J. Candelora, R-North Branford, said Connecticut residents also continue to struggle with a very high cost of living. And Lamont’s plan to order a one-time $200-per-person tax rebate in late October, just days before voters decide whether to reelect him to a third term in office, is not sufficient, he said.
“A check in the mail is a political move, not a policy” Candelora said. “Connecticut residents frustrated by rising property taxes don’t need a one-time payment that disappears next year.”
“Governor Lamont is committed to more taxpayers, not more taxes,” the governor’s budget spokesman, Chris Collibee, said afterward. “ Any changes in revenue must be sustainable for the future. He is always looking for ways to save costs. They must be done in a way that is sustainable for the future.”
House GOP: Time to force a tax showdown with New York
House Republicans also said Monday that Connecticut could boost revenues by as much as $340 million per year — more than enough to cover the entire cost of the proposed income tax cut — if it reverses its unfair tax relationship with its largest neighbor.
New York demands income tax from Connecticut residents who work remotely from home for New York-based employers. Growing technology coupled with the coronavirus pandemic outbreak in 2020 led to a huge explosion in remote work, and New York officials have said it’s unfair for the state that supports so many large employers, and so many jobs, to lose the tax revenue.
Connecticut offers a credit so an estimated 80,000 of its residents in this situation don’t have to pay taxes to two states.
But House Republicans here said Monday a credit is not a long-term solution, calling the current law “a workaround that leaves New York’s hand in Connecticut’s pocket and does nothing to bring that revenue home.”
New York’s income tax has a top rate of nearly 11%, while Connecticut’s maxes out at 6.99%. That means Connecticut residents who work remotely for Empire State employers can face a much higher tax burden.
The Lamont administration noted Monday that Connecticut passed a law last year that creates an income tax credit for any resident who successfully battles New York or some other state in federal court over the double taxation issue.
But House Republicans say that incentive hasn’t produced changes yet. If Connecticut were to repeal its current law exempting its residents working remotely for New York-based employers, putting tens of thousands at risk of double-taxation, it would likely trigger a federal court battle that could create a fair compromise, Republican lawmakers say.
This article first appeared on CT Mirror and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.
