⏩ Democrats back off capital gain tax increase.
HARTFORD — Democrats’ decision to punt a proposed increase of the capital gains tax may be a signal that lawmakers are falling in line with Gov. Ned Lamont’s promise not to increase taxes on the wealthy.
The vote by the Finance, Revenue and Bonding Committee on Tuesday to replace a capital gains tax increase with a study bill comes less than 48 hours before the committee is expected to unveil its complete tax package.
The move could signal centrist Democrats are now flexing their muscle, said Eric Gjede, vice president for Government Affairs for the Connecticut Business Industry Association, which opposed the increase.
“There’s a number of moderate Democrats who are starting to be a little bit concerned with some of the policy choices being made,” said Gjede.
Lamont opposed tax increases on investment income, just as he promised not to raise income taxes on the state’s richest residents. He says he wants to hold tax rates steady, but he has proposed some tax expansions, like applying the state sales tax to more goods and services.
But to some Democrats in the Legislature, boosting taxes capital gains was a way to shift to a more progressive tax model and share the states’ tax burden more equally across tax brackets.
The Democrat-led Finance Committee filed legislation earlier this month to bump up the tax on capital gains by 2 percentage points, but only for households already the top state income tax of 6.99 percent. That change was anticipated to raise $200 million a year for the state.
But on Tuesday, committee leaders revealed substitute language for the bill that said the Legislature would only study the idea of raising the capital gains tax. The committee voted to pass the bill, delaying a decision on a real increase for now.
But with five weeks left in the session, a capital gains tax increase could crop up as an amendment to another bill later.
The chair of the committee Rep. Jason Rojas, D-East Hartford, who previously said increasing the capital gains tax was a “more balanced approach to the revenue side of the budget,” backed off on Tuesday.
“There is nothing wrong with studying,” he said. “I’m a former graduate student so…”
Republican Rep. Chris Davis, R-East Windsor, so strongly opposed the tax increase he said “I don’t want to even study the idea of surcharges on capital gains.”