Dems wary of parts of tax plan
Some are skeptical of cuts that would benefit high-income earners
HARTFORD — Gov. Ned Lamont’s tax cut has been touted for helping the lower and middle classes, but some Democrats are concerned that the relief would also go to high-income earners.
The details of the plan — which were not highlighted in Lamont’s 30-minute budget address to legislators — show that the tax cut does not phase out until income reaches $345,000 for individuals and $690,000 for couples filing jointly.
An individual earning $175,000 per year, for example, would receive a tax cut of $250 per year, which is close to the maximum tax cut of $290 per year for a person earning $65,500.
Couples filing jointly and earning as high as $575,000 per year would receive a tax cut of $200 per year — slightly below the $212 tax cut for a couple earning $50,000 per year — with income less than one tenth of the high-earning couple.
The different tax savings are based on the vagaries and the nuances of Connecticut’s tax system, along with the plan to reduce the current 5% rate to 4.5% and the current 3% rate to 2%.
Senate President Pro Tem Martin Looney, a liberal Democrat from New Haven, strongly favors the cuts for the lower and middle classes but said he will be looking to enact a cap to block the tax cuts for the wealthy.
“I don’t think there’s any real benefit to be gained from giving a $200 tax cut to somebody making half a million,’’ Looney said. “[It’s] virtually unnoticeable to them, but in the aggregate, it makes the tax cut proposal more expensive than it otherwise would be. So I expect there’ll be some adjustments to the range to which the tax cut applies, hoping to focus more of it on the people who truly need it though in the lower income brackets.”
House Speaker Matt Ritter, a Democrat who represents many lower-income voters in his hometown of Hartford, agreed that
he does not favor the tax reductions at the high end.
“I don’t know that we’re going to support that,’’ Ritter said. “I think [Lamont] gave $200 to someone making 700K. I’m not interested in that. That’s gimmicky to me, so I think we can get rid of that - at least from my perspective. ... I don’t think giving 100 bucks to someone making $1 million a year makes sense to me.’’
With public hearings and committee deliberations scheduled over the coming weeks and months, Ritter said Democrats will also discuss increasing the child tax credit, as well as reducing the state income tax.
“Do I think we will reduce income taxes? Yes,’’ Ritter said. “The question will be how much and where does the child tax credit and earned income tax credit fall into that bucket.’’
Even with surpluses in recent years, some liberal Democrats say that the state should increase taxes on the rich, beyond the current maximum rate of 6.99%, starting after the current two-year budget cycle in 2025 when federal funding has run out and revenue may be needed.
“We are open to any conversations, but I don’t think we have a revenue problem, per se, right now,’’ Ritter said. “Look, I’ve always said progressive taxation is best done at the federal level. But that aside, I have voted to increase income taxes because we had to. But I think it’s a last resort, and right now, the numbers don’t seem to indicate to me that we have a revenue problem.’’
As the two highest-level Democrats at the Capitol, Ritter and Looney will be key players in the final budget negotiations that will take place with the Lamont administration in late May and early June. The tax and budget committees will make their recommendations in April, but state officials always say they cannot make final decisions until receiving the final tax totals from the traditional April 15 tax deadline that has been postponed this year until April 18.
Lamont has a history of negotiating with Ritter and Looney, but he also stands firm on issues like blocking any increases in the income tax above the current maximum of 6.99%. The administration purposely focused on helping the lower and middle class in the latest proposal, officials said.
“It is the Lamont administration’s philosophical belief that creating tax cliffs is never a good first option,’’ said Julia Bergman, the deputy communications director. “Opting for eligibility tapering enables lower-income earners to benefit most while also avoiding penalizing people.’’
At the highest end under Lamont’s plan, the tax savings would be sharply reduced as individuals earning $325,000 per year would receive a tax break of $41.67, while couples earning $675,000 per year would receive $33.33.
Despite concerns from Democrats, House Republican leader Vincent Candelora, who has clashed with Lamont on other issues, said he has no problem with the level of the proposed reductions.
“Given that it almost mirrors our exact tax proposal from last year, I think Republicans are very much on board with the governor’s proposal,’’ Candelora told The Courant.
Concerning Looney’s view that the relief is too much for higher earners, Candelora said, “I think that is a function on the fact that we’re reducing the 3% and the 5% numbers. It is naturally going to impact all of our residents. I’m sure that Sen. Looney will find another way to gouge the wealthy, so I think we’re better off leaving the proposal as is.’’
After years of spending billions to pay down the underfunded pension debt for state employees and public school teachers, Candelora said it is time to pivot and deliver more tax cuts for individuals.
“At some point, you’ve got to give back to the residents or they’re not going to buy into what we’re doing,’’ Candelora said. “We have felt that we’re putting billions of dollars into a pension fund that is not helping the residents, per se. It is helping the state workers. We need to show the residents why we’re doing that — and that is to reduce their taxes ultimately. Every five years, we should be lowering taxes, and I’m pleased to see the governor finally make this step.’’
Senate Republican leader Kevin Kelly of Stratford, who represents a largely middle-class district, said the $50.5 billion, two-year budget proposal is headed in the right direction but needs to be sped up to provide quicker relief.
“It’s focused on the middle, low and working class families and trying to bring relief to families in need,’’ Kelly said. “I think we can do better because we have the capability to do that. But this is a great start in that process. While it’s a [one percentage point] reduction, or up to a 1% reduction, that doesn’t take effect until 2024. There’s no reason why we can’t have that retroactive to January last month of this year to help Connecticut families.”
Noting that Republicans proposed $1.2 billion in tax cuts last year that were never approved by the Democratic-controlled legislature, Kelly said the state should offer even more relief in broad-based fashion.
“We got to focus on reducing the cost of living in Connecticut,’’ Kelly said. “We’ve got to look at workforce development and making sure that the resources and energy is put into that and really trying to get our economy moving to a large part by getting government out of the way. There’s a reason Connecticut’s unaffordable. It’s because government keeps putting burden on the family budget. And while the state’s fiscal house of cards are very strong, the people we serve, the families across Connecticut are struggling and in many cases living paycheck to paycheck. And it’s really kind of backwards. When the government is fine fiscally and the people we serve are struggling, it really should be the other way around.”