Budget deal avoids major tax hikes
Spares towns on pensions, wealthy on income taxes
HARTFORD — Towns and cities would not be forced to pay a share of their local teacher pensions, but owners of business partnerships would see higher taxes under the two-year, $43.8-billion state budget announced Thursday afternoon by Gov. Ned Lamont and majority Democrats.
The plan would raise taxes on wealthy families far less than Democratic liberals had wanted. There is no increase in the income tax at the top level, and there is no surcharge on capital gains — both ideas floated in recent weeks, which would have raised hundreds of millions of dollars.
Owners of multi-milliondollar mansions would be hit with a surcharge under the legislation, raising less than $10 million, sources said.
With less than a week to go before the end of the session — and with no input from minority Republicans in the General Assembly — Democratic leaders agreed to a spending package that would
include a multi-year phase-out of personal income taxes on retirement and Social Security income, in an attempt to keep retirees here.
During a news conference that aired scant, broad-brush details, legislative leaders said they want their caucus members to review the package before they release more. But they said a requirement that towns and cities for the first time pay up to $70 million a year toward teacher retirement benefits was dropped from the final bill.
Both Lamont and the budgetwriting Appropriations Committee had planned to force the new payment requirements on municipalities.
Lamont said schools will get more education funding and the mostdistressed education systems would share $40 million in the first year of the budget that starts July 1.
A 2.5 percent surcharge would be assessed on the sale of homes valued over $2.5 million.
The sales tax would remain at 6.35 percent but would be broadened to include some goods and services that are now exempt. The list of added items includes parking, dry-cleaning and interior design, and totals about $50 million by the second year of the biennium.
The tax on parterships such as LLC’s and LLP’s would raise about $45 million a year, sources said, by piggybacking on a tax change last year under which the owners of those businesses paid a tax on profits at the business level, rather than as personal income. Under the change, they would be forced to pay some income taxes in addition to the profits tax, although details were not available.
Despite the additional revenues, Lamont said the $3.5-billion budget deficit was addressed without raising taxes — meaning rates on existing taxes.
“I spent last year, during the campaign, saying the most-important thing we can do as a state to get this state growing and moving again, is to show people that we can get our fiscal house in order; show people that we can get a budget done on time; show the taxpayers of this state that we can live within our means,” Lamont said, flanked by legislative leaders and his staff, standing at a podium in his Capitol office.
Hundreds of millions of dollars in the current $571 million operating surplus would be diverted from the projected $2.6-billion budget reserve. Lamont has said all along that he wanted to avoid using the surplus money to fill the budget gap. Details were not available Thursday.