State plan for $300 in property tax credits advances
The General Assembly’s Democrat-dominated Finance, Revenue and Bonding Committee on Wednesday put together a package of budget proposals including an election-year expansion of Connecticut’s property tax credit that since 2017 has been restricted to the elderly and families with dependents.
Minority Republicans failed in an effort to increase the credit beyond Gov. Ned Lamont’s proposed $300 credit for owners of motor vehicles or homes. A separate GOP proposal, to link future income tax exemptions to inflation, was also rejected.
Although the Finance Committee’s version expands eligibility for the credit, it sets tighter income limits than Lamont’s proposal. The plan that advanced Wednesday would be restricted to $100,000 and less in adjusted gross income for couples filing jointly.
Since 1994, the credit has fluctuated, rising up to $500 but is now is $200 and only available to about 500,000 taxpayers. The $300 credit would be available to about a million taxpayers.
The committee’s version now goes to the state Senate and ultimately the House, but first it will be subject to negotiations with Lamont and legislative leaders, as part of the overall changes to the second year of the 2-year budget. The second year starts July 1. Lamont, after a mid-afternoon event in Hartford, said he was amenable to reviewing what the legisature offers.
At least five Democrats, Rep. Stephen Meskers of Greenwich, Rep. Jill Barry of Glastonbury, Rep. Kerry Wood of Rocky Hill, Rep. Chris Ziogas of Bristol and Rep. John Hampton of Simsbury, voted against the revenue package in a midafternoon vote that remained open into the evening.
State Rep. Holly Cheeseman, R-Old Lyme, a top Republican on the panel, proposed raising the property tax exemption to $500. “I believe that we have to do everything possible to create a more-affordable Connecticut,” Cheeseman said, recalling that in 2018, Lamont campaigned on a similar $500 credit.
But Lamont and Rep. Sean Scanlon, D-Guilford, the committee co-chairman, both said the state is limited by federal rules that restrict tax cuts or credits because of the pandemic relief. Connecticut’s share of that money totals $2.8 billion, some of which has been moved into the reguar budget.
“I certainly would hope that we could expand the property tax credit beyond where it is today,” Scanlon said. “I do not believe we have the capacity to get there now, though I do hope that those who hold this office in the future will hope to get us there in the future, once the conditions that are handcuffing us go away.”
The state is enjoying robust sales tax and income tax revenue and is projected to end the current fiscal year with a $1.7 billion surplus, leading both parties to push for tax breaks in an election year. But aside from the federal rules, economic forecasts predict deficits in 2024 to rival the multi-billion-dollar shortfall that met Lamont when he took office in 2019.
A balancing act
After Cheeseman’s first amendment failed, she offered a second that would link exemptions to the personal income tax indexed to inflation in the future. “As we see high rates of inflation, we see how people may be pushed into a higher income tax bracket simply for trying to stay ahead and keep their families whole,” Cheeseman said.
Scanlon said of that proposal, “I do find it to be well-intentioned and something that there is certainly probably support for in this committee, I’m sure, epecially even from the chairs, but it’s not something at this time that we feel like that we can do.”
A couple hours later, Lamont noted that the legislature is well aware of the limitations on spending and revenue dating back five years, which tie increases in state government to economic growth. “So, I think we honor the rules we made. If they want to change the rules, vote to change the rules. Otherwise, I think we stick to the rules of the road,” Lamont said, stressing the need for childcare and mental health programming. “I don’t think it’s necessary to break the tax cap or the spending cap.”
Lamont described a balancing act of tax breaks in the $24 billion budget for fiscal 2023, which he’s willing to negotiate as long as they stay within limits and as long as they’re sustainable over the long haul.
“Maybe they don’t want to do the car tax,” Lamont said. “Just tell me what you want to replace. What tax cut you want to get rid of ? You know where I stand on the property tax. You know where I stand on the car tax. You know where I stand on eliminating the income tax on 401(k)’s and pensions. If you don’t like any of those, any of those tax cuts, if you think you have a better one instead of that, we’ll talk.”
Motor vehicle tax changes
The finance panel on Wednesday also rewrote Lamont’s proposed statewide tax rate for personal passenger vehicles which would limit city and town taxes to $29 per $1,000 of assessed value, or 29 mills, and reimburse municipalities for the lost revenue.
Under the legislative plan, offered as an amendment by Sen. John Fonfara, D-Hartford, co-chairman of the committee, taxpayers in towns and cities with mill rates of 29 or greater would get $5,000 exemptions on the value of their personal motor vehicles, at a cost to the state of about $250 million.
“I’ve got to price that out,” Lamont said when informed of the committee action. “I’m the guy that’s got to make sure that the numbers add up. If they add up, we talk about it.”
In an easier, bipartisan vote, the panel also approved a capitol budget that would be paid through long-term borrowing. It also overwhelmingly approved legislation to create a training program to support people who want to commercial operator licenses at a time when there is an acute need for truck drivers.
Senate Minority Leader Kevin Kelly, in a joint statement Wednesday with his top deputies, criticized Democrats for waiting until minutes before the meeting’s scheduled 9 a.m. start to release details of the revenue package.
Kelly favors a temporary cut in sales taxes, which would provide less relief to most families but would be more immediate, in contrast to credits against the state income tax, which families would see early in 2023.
“To receive this at the last minute is an attempt by Democratic leaders to rush a vote and limit time for review and discussion,” Kelly said. “What they should be rushing to do is provide immediate tax relief to residents. Instead, they are hastily pushing through a package that does not provide any relief for at least another year .... By rushing this through today they are trying to silence the voices of those who want greater and faster tax relief for working and middle-class families who are struggling today.”