If the Democrat-controlled Finance, Revenue and Bonding Committee has its way, new taxes on the wealthy will have Connecticut rolling in the dough ”“ though the plan faces opposition from Gov. Ned Lamont as well as state Republicans.
The proposal would increase capital gains taxes by 2% points for couples earning at least $1 million per year and for individuals earning at least $500,000 per year, which would bring in an estimated $262 million.
Also included is a “consumption tax,” which again would apply to individuals making $500,000 or more per year; it would begin at 0.7% for those making between $500,000 and $2 million and escalate to 1.5% for those making at least $13 million.
Gov. Ned Lamont has repeatedly said he will not support new taxes on Connecticut residents, but indicated yesterday that he was willing to discuss the proposals further.
The governor does support a mileage tax for large tractor-trailer trucks; the Committee”™s plan includes such a tax, which would raise an estimated $45 million in Fiscal Year 2023 and another $90 million in FY 24.
The Committee package also allows bars, restaurants and hotels and caterers to continue to collect the 7.35% tax on meals and beverages, but remit only 6.35% on to the state between July 1, 2021 to June 30, 2022.
Among the plan”™s other items:
- Disallowing a previously approved plan to eliminate the 10% surcharge on the corporation tax, which would net the state $80 million in FY 22 and $50 million in FY 23.
- Instituting new taxes related to gaming ($30.5 million in FY 22, $43.1 million in FY 23, $58.8 million in FY 24).
- Implementing new taxes related to cannabis legalization ($11.1 million in FY 22, 39.5 million in FY 23, 73.1 million in FY 24).
GOP leaders lost little time in decrying the moves.
“Connecticut is growing more unaffordable by the day and families are struggling. Yet Democrats are pushing for a tax increase totaling $3.2 billion over three years,” Senate Republican Leader Kevin Kelly (R-Stratford), said in a statement. “Some of these tax increases are regressive and will hurt those most struggling today.
“For example,” he continued, “a mileage tax on trucks will result in higher costs on products they transport, like groceries and home heating oil. And if the billions in new taxes drive out Connecticut’s wealthiest taxpayers, it is the working and middle class who will be left behind to foot the bill.”
“Democratic proposals in this package are completely abandoning the smart fiscal policies that resulted in the billions in (the $3 billion Rainy Day Fund) today,” said Senate Republican Leader Pro Tempore Paul Formica (R-East Lyme).
“It flies in the face of our caps and could possibly even be a violation of our bond covenants,” he added. “There are also at least $2 billion in one-time revenues in this proposal that will result in an equal sized budget hole in the next budget.”
New budget proposal
Meanwhile, the General Assembly”™s Appropriations Committee has approved a $46 billion, two-year state budget that includes some significant differences from Lamont”™s budget proposal
While Lamont”™s two-year budget, unveiled in February, also totals $46 billion, it includes allocating an additional $100 million to 25 distressed cities and towns, on top of the projected federal support for the state”™s municipalities.
The Appropriations Committee”™s version calls for spending $180 million on municipal aid in the first fiscal year ”“ roughly a 1.8% increase from current levels — which begins July 1, and another 3.7% increase in the fiscal year that begins July 1, 2022.
The new plan also provides for additional support for low-income families, as well as for nonprofits; an extra $75 million to help the state university and community college system overcome their deficits; and the establishment of a new office within the state Department of Labor to further streamline unemployment services.
Senate Republican Leader Kevin Kelly (R-Stratford) issued a statement that criticized the Appropriations plan for leaning too heavily on federal assistance.
“Above all, we must ensure that federal funding is used in a way that is both transformative and empowering,” he said. “We must not perpetuate a cycle of needing future federal assistance. Rather, the programs we support and the decisions we make must be designed to truly lift people up and out of poverty and hardship, and spark long term economic growth, so that every person has the opportunity to succeed.”
Saying that the new plan uses “budgetary gimmicks to avoid the state’s spending cap,” Kelly said, “Someone is going to have to pay, and I fear the middle class will be hardest hit.”
CBIA President and CEO Chris DiPentima also issued a statement critical of the proposal: “Small businesses will bear the brunt of many of these tax increases and it defies sensible logic that there are lawmakers who think further burdening struggling smaller employers is a positive for the state.
“These tax hikes erode the opportunities the state has to rebound from the pandemic stronger and better before, to change the state”™s narrative, and reimagine a Connecticut that can compete regionally, nationally, and globally,” he added. “Given the historically high balance of the state”™s Rainy Day Fund, this fiscal year”™s budget surplus, and significant federal relief funds, Connecticut does not need tax hikes, as the governor and independent analysts have noted.”
The proposed tax on real estate transactions will leave both buyers and sellers hurting based on the final amount for the sale of homes in this state. Specifically, it is not the wealthy who will feel the pinch, rather the middle class who are struggling to remain in their homes, paying their mortgages, home insurance, etc, they are the ones who will suffer the most along with senior citizens who are most often widows and widowers who are retired and need all that they can realize from the sale of their homes. DO NOT TAX REAL ESTATE TRANSACTIONS BELOW $1,000,000.
Is it any wonder people are fleeing Connecticut as soon as they can. A friend of ours estimates he’s received a 40% increase in take home pay by leaving Connecticut and moving to Tennessee. And yet, Democrats just keep piling taxes and fees on as if they are intentionally trying to force businesses and residents out of the state.