Bud­get could hinge on pro­gres­sive taxes

The News-Times - - NEWS - By Keith M. Pha­neuf Tax­ing the rich is ‘a re­ally bad idea’ Property tax re­lief in jeop­ardy? Pro­gres­sives of­fer new op­tions to tax the rich

Gov. Ned La­mont’s goal of com­plet­ing his first state bud­get on time could be stymied by his re­luc­tance to or­der taxes aimed specif­i­cally at Connecticu­t’s wealthiest.

Boxed in by large deficit fore­casts and caps on spend­ing and rev­enue, the new ad­min­is­tra­tion is find­ing that progress to­ward one goal may cause oth­ers to un­ravel.

“Any time you move one piece here or there it cre­ates a con­cern some­where else,” said Rep. Ja­son Ro­jas, D-East Hart­ford, who has been House chair­man of the Fi­nance, Rev­enue and Bond­ing Com­mit­tee for the past three years.

“I think it’s ob­vi­ous we have a few things in the rev­enue pack­age that are caus­ing con­cern this year,” Ro­jas said.

One of those con­cerns was raised by the gov­er­nor, who cam­paigned on a pledge not to raise in­come tax rates. He avoided that op­tion in Fe­bru­ary when he pro­posed his bud­get, even though state fi­nances were pro­jected to run about $3.7 bil­lion in deficit — un­less ad­justed — over the next two fis­cal years com­bined.

Some leg­is­la­tors balked at the gov­er­nor’s rev­enue pack­age, say­ing it was too re­gres­sive. Hun­dreds of mil­lions of dol­lars would be raised by can­cel­ing dozens of sales tax ex­emp­tions. A new tax would be im­posed on sug­ary beverages and mu­nic­i­pal­i­ties would be forced to con­trib­ute to the teach­ers’ pen­sion fund.

The fi­nance panel coun­tered with a more mod­est sales tax ex­pan­sion. It dropped the sug­ary beverages tax and teacher pen­sion bills.

The com­mit­tee also pro­posed a tax hike on cap­i­tal gains — but only on house­holds al­ready pay­ing the top state in­come tax rate. That means sin­gles earn­ing more than $500,000 an­nu­ally from all sources and cou­ples top­ping $1 mil­lion.

La­mont called this a “re­ally bad idea” and re­peated ear­lier warnings that tax­ing the rich would drive Connecticu­t’s big­gest tax­pay­ers to move out of state.

The fi­nance com­mit­tee was counting on the cap­i­tal gains sur­charge to raise $262 mil­lion per year by 2020-21.

Sources said closed-door talks be­tween the ad­min­is­tra­tion and leg­isla­tive lead­ers in­clude a scaled-back sur­charge only on cer­tain short-term cap­i­tal gains — in­vest­ments held for less than one year — that would yield $50 mil­lion per year in rev­enue for the state.

That would leave more than $210 mil­lion in other rev­enue or sav­ings for La­mont and leg­is­la­tors to find to bal­ance the bud­get.

If the gov­er­nor and leg­is­la­tors can’t agree on tax­ing the rich to bal­ance the books, the next stop is the mid­dle-class.

La­mont cam­paigned on a pledge to de­liver ma­jor property tax breaks to low- and mid­dlein­come house­holds. He said most of that re­lief could come in the third and fourth years of his term by ex­pand­ing a pop­u­lar state in­come tax credit.

But La­mont also pledged to pro­vide some re­lief in his first bud­get.

Low- and mid­dle-in­come house­holds with­out chil­dren lost the abil­ity two years ago to re­duce their state in­come tax obli­ga­tions by up to $200 — pro­vided they paid that much in lo­cal property taxes.

La­mont pro­posed restor­ing that el­i­gi­bil­ity, and the $53 mil­lion per year those house­holds lost, start­ing with tax re­turns they file in 2021.

But that pro­posal now is in jeop­ardy, as the gov­er­nor and leg­is­la­tors seek al­ter­na­tives to the cap­i­tal gains sur­charge.

“Gov. La­mont re­mains com­mit­ted to pass­ing a bud­get that will put the state on the best path for­ward for the en­su­ing bi­en­nium and the decades to fol­low,” said Melissa McCaw, La­mont’s bud­get di­rec­tor. “… We need to en­sure that Connecticu­t’s res­i­dents, busi­nesses and in­vestors have more cer­tainty and pre­dictabil­ity and we will not be ex­posed to tax rate volatil­ity while the state bounces from one fi­nan­cial cri­sis to an­other.”

But some of the La­mont’s fel­low Democrats in the House and Sen­ate see things dif­fer­ently.

The House Demo­cratic Pro­gres­sive Cau­cus, which in­cludes more than 40 of the 91 party mem­bers in that cham­ber, has been press­ing for higher in­come taxes on the wealthy since the ses­sion be­gan.

Th­ese could be used, mem­bers said, to scale back the gov­er­nor’s sales tax plan, shore up fund­ing for ed­u­ca­tion, health care and mu­nic­i­pal­i­ties, or re­duce Connecticu­t’s sig­nif­i­cant pen­sion and bonded debt.

The cau­cus teamed with dozens of la­bor unions, churches and other re­li­gious groups Mon­day at the Capi­tol for the “Fair & Just Bud­get Rally.”

Or­ga­niz­ers sent the ad­min­is­tra­tion an ar­ray of op­tions for tax­ing the wealthy, in­clud­ing the cap­i­tal gains sur­charge rec­om­mended by the fi­nance com­mit­tee.

They also of­fered a “3-2-1 plan” to boost the top mar­ginal rates on the state in­come tax.

Cou­ples mak­ing more than $1 mil­lion per year al­ready pay 6.99 per­cent on all earn­ings.

Un­der this plan, cou­ples earn­ing:

⏩ More than $5 mil­lion would pay

9.99 per­cent.

⏩ More than $1 mil­lion would pay

8.99 per­cent.

⏩ More than $500,000 would pay

7.99 per­cent.

The coali­tion’s fi­nal op­tion was the so-called “man­sion tax, a statewide property tax of one mill on houses val­ued at more than $1 mil­lion. Pro­po­nents es­ti­mated this would raise $59 mil­lion per year.

But sources said the fo­cus of the ad­min­is­tra­tion has been on avoid­ing ma­jor tax hikes on the rich.

With Repub­li­cans in both cham­bers of­fer­ing no al­ter­na­tive bud­get — and mak­ing it clear they will vote against any plan with tax hikes — La­mont and most of his fel­low Democrats likely must solve the next bud­get by them­selves.

“We’re hop­ing we come up with that bal­ance to where it passes our cau­cus, passes the Sen­ate and gets the gov­er­nor’s sig­na­ture,” House Speaker Joe Ares­i­mow­icz D-Ber­lin, said. “We can’t just do it on our own.”

House Ma­jor­ity Leader Matt Rit­ter, D-Hart­ford, said the cap­i­tal gains sur­charge en­dorsed by the fi­nance com­mit­tee “made sense” to him as part of a larger mix of rev­enue-rais­ing pro­pos­als. “The gov­er­nor dis­agrees and he’s the gov­er­nor of the state. We’ve got to work with him on that.”

So what hap­pens if Demo­cratic lead­ers ask rank-and-file leg­is­la­tors to adopt a bud­get with no tax hikes aimed at the rich?

Ares­i­mow­icz and Rit­ter de­clined to spec­u­late on what that fi­nal plan might con­tain, but both ex­pressed op­ti­mism they can se­cure the nec­es­sary votes.

“I would say the pre­vi­ous two years and this year we spent a lot of time talk­ing to cau­cus mem­bers,” Ares­i­mow­icz said. “I think we have a good un­der­stand­ing of where their pri­or­i­ties are and where they’d be will­ing to land.”

“Peo­ple have opin­ions, but there’s not a di­vide what­so­ever,” Rit­ter said. “We have a 91-per­son cau­cus that is tight, work­ing to­gether. We have mod­er­ates, we have lib­er­als, we have ev­ery­thing in be­tween.”

But Rep. Anne Hughes, DEas­ton, co-chair­woman of the pro­gres­sive cau­cus, said lead­ers should not un­der­es­ti­mate her cau­cus’ commitment.

“We want pro­gres­sive tax­a­tion and the gov­er­nor is say­ing ‘no,’” she said. “I think that will be a prob­lem. I don’t know how we can do this (bud­get) with­out some form of pro­gres­sive tax­a­tion.”

Brian A. Pounds / Hearst Connecticu­t Me­dia

Gov. Ned La­mont

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.