$46 billion plan includes no tax hikes on rich, credits for low- and middle-income families
HARTFORD — Negotiators are getting closer to a compromise deal on a two-year, $46 billion state budget that would include key Democratic spending priorities, tax credits for low-and middle-income families, no tax hikes on the wealthy and could receive a vote in the state House of Representatives as early as this Saturday.
House Speaker Matt Ritter of Hartford said he has at least 95 votes for a Democraticwritten package that would increase funding for major party priorities that include HUSKY Ahealth insurance, mental health, aid for cashstrapped cities and increased pay for workers at nursing homes, among others.
The key compromise for House Democrats is they have backed off major tax increases for the rich that have prompted a veto threat by Gov. Ned Lamont. That includes dropping plans to hike the 6.99% rate on capital gains taxes, which are paid through the state income tax, by an additional two percentage points — which would translate into an increase of more than 25% in capital gain taxes paid by the state’s wealthiest earners. Lawmakers would also drop plans for a new consumption tax on the rich, which Republicans say is actually an
increase in the state income tax.
Ritter says Lamont has not budged on the tax hikes — and so House Democrats have backed away from those issues in an attempt to reach a compromise that is being negotiated behind closed doors.
“The governor has not moved his position on capital gains,” Ritter said. “We’ve made that concession. ... Those two things he is not going to support.”
Lamont reiterated his view that no broad-based tax increases are needed at the time when the state has a projected surplus of nearly $550 million for the current fiscal year, a rainy day fund of $4.5 billion and $2.65 billion in federal stimulus funds coming to the state over the next three years.
“I think there’s broad agreement that we don’t need new revenue,” Lamont told reporters Wednesday after a bill-signing ceremony outside Hartford City Hall. “We’ve got a strong surplus. We’ve got a strong economy. We’ve got a fair amount of money coming in that allows us to invest in folks that have been hit hardest by COVID and get this economy moving again — and we can do that without new taxes.”
Concerning Ritter’s statements about a potential agreement before the legislative session adjourns on June 9, Lamont said, “I’m optimistic, too. I think we want a budget deal. I’d like to get it done on time.”
A major priority for Democrats is a plan to help cities that could cost as much as $2 billion over 10 years in a long-term proposal that would be similar to the UConn 2000 program that transformed
the state’s flagship university. Lamont, however, has pushed a “debt diet” since taking office and is still negotiating on the spending plan.
“I’m not going to be one of those governors that ties the hands of my successors,” Lamont said when asked by The Courant. “Look, while I’m here in this office, I’m going to make real commitments to our towns and cities and make investments where they ought to be — and make sure that our bonding is there for affordable housing and brownfields and an equity fund that allows people to start up their business.”
At the same time, Lamont is still in favor of a tax increase of $50 million on health insurers in Connecticut, saying those same companies are receiving $300 million in federal tax breaks.
In a disagreement with liberal Democrats, Lamont said that he does not want to set up “off-budget” accounts that would allow programs outside of the state’s general fund.
“They just passed the spending cap four years ago,” Lamont said. “Let’s not play games with the spending cap.”
Two key pieces on the tax side of the budget both involve two key Democratic priorities on children and families.
Democrats are pushing for increasing the state earned income tax credit to 30% of the federal credit — a boost from the current level of 23%.
Connecticut never had a state earned income tax credit until the administration of Gov. Dannel P. Malloy, but the level of the credit has fluctuated with budgetary fortunes.
Another key priority for Democrats is a new child tax credit against the state income tax. That will not start until the third year, Ritter said, because families will be receiving increased federal tax credits under President Joe Biden’s administration as a result of the federal COVID-19 stimulus package.
Lawmakers have called for a maximum credit of $600 per year per child for as many as three children — meaning that a family could receive a maximum reduction of $1,800 per year on their state income taxes. The measure would impact 853,000 children in the state.
Single mothers and fathers earning up to $110,000 per year would be eligible for the credit. Couples filing jointly who earn less than $210,000 per year would also be eligible. Nofinal deal, however, has been reached on the proposal.