As state budget negotiations approached the midnight hour last week, Democratic House leaders reportedly cut off a meeting with Gov. M. Jodi Rell”™s budget chief after learning Republican counterparts would be present.
The spat, witnessed by a Hartford Courant blogger, illustrated the tension over a spate of budgetary differences as Democrats attempted to preserve their proposal to raise taxes on big earners.
Just a few years after the state leaned on corporations to cover a deficit, legislators could afford a little brinksmanship at the budgetary deadline of June 6, due to an expanding economy fueled in part by Fairfield County”™s thriving phalanx of high-finance firms.
Still, business leaders want government leaders to position the state for a new round of growth by eliminating obstacles they say hinder their development in Connecticut. Those perceived obstacles include providing quality education and training for prospective employees, getting them health insurance, creating affordable housing and improving commutes.
In February, Rell forwarded to the Connecticut General Assembly a $35.8 billion spending plan for the next two years, addressing some of those priorities to various degrees. Democrats countered Rell”™s plan, which would require a gubernatorial emergency order to skirt spending limits, with their own $36.4 billion draft to pay for various programs and the readjustment of tax brackets.
After five months of legislative wrangling heading into the budget deadline last Wednesday, the governor and General Assembly were still at odds on the question of taxes.
Abandoning her own plans to hike income taxes by .05 percent to pay for property tax relief and education programs, Rell vetoed in late May a Democratic tax plan attached to a bill addressing tax credits for the production of movies in Connecticut.
The Democratic proposal was designed to produce at least $300 million in additional revenue annually, according to Bonnie Stewart, vice president of government affairs for the Connecticut Business & Industry Association (CBIA). The Democrats called for a 30 percent increase in the rate for incomes above $500,000, offset by a 5 percent reduction in the rate for incomes under $100,000.
Stewart noted the tax would also affect limited liability companies that are taxed according to personal income tax rules, rather than standard corporate tax brackets. Those limited liability companies are often small businesses that contribute significantly to job growth in Connecticut, Stewart said.
Â
Rell jettisoned her own tax proposal after receiving revised budget surplus projections. In April, the surplus stood at $628 million, up $92 million from a March estimate. The additional surplus is the result of the state corporation tax, Rell indicated, which was temporarily increased a few years ago to cover a budget deficit.
“A rising surplus is not a license to spend,” Rell said, in one of several statements issued during the waning days of the budget debate. “These are one-time revenues that should either be saved or used for one-time purposes. I would prefer to see them deposited in the Rainy Day Fund.”
That fund currently is valued at approximately $1 billion, according to Stewart.
Democrats, in turn, fought a proposal by Rell to cap local property tax increases at no more than 3 percent annually, saying it would torpedo municipal budgets that have not factored any such ceiling into their revenue projections.
Â
