CT lawmakers haggle over tax cuts as budget clock ticks

How much will your taxes drop this year? With less than two weeks left to pass state budget changes, Connecticut lawmakers are squabbling over how much they can cut – and strict federal rules may tie their hands.

John Craven

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Apr 21, 2022, 10:01 PM

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Updated 975 days ago

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How much will your taxes drop this year? With less than two weeks left to pass state budget changes, Connecticut lawmakers are squabbling over how much they can cut – and strict federal rules may tie their hands.

The state has a massive $4 billion projected surplus thanks to inflation, a strong stock market and more people moving to Connecticut. But most of that extra money is thanks to one-time federal relief dollars – almost like a winning lottery ticket.

Republicans say the state needs to return the surplus to taxpayers.

"They’re having a tough time, yet their government that they pay for is awash in money,” said state Senate Minority Leader Kevin Kelly. “That’s just not fair.”

On Thursday, the GOP proposed “An Affordable Connecticut,” a slate of across-the-board tax cuts:

Cuts income tax rate from 5% to 4% (for single filers making under $75,000 a year and joint filers making under $175,000)
Eliminates the Highway User Fee on trucks, which Gov. Ned Lamont says is critical to securing federal highway funds
Expands $200 property tax credit to all homeowners
Puts $225 million in federal relief money into the Unemployment Trust Fund, saving small businesses money

The Republican plan also includes temporary rollbacks through the end of 2022:

Eliminates 1% restaurant tax
Cuts sales tax from 6.35% to 5.99%
Extends “gas tax holiday” and expands it to diesel trucks

"Certainly affordability in the state of Connecticut is the number one issue for our residents,” said state Rep. Vin Candelora, the Connecticut House Minority Leader.

But the GOP proposal relies on continued economic growth, and some analysts are predicting a recession in 2023. Plus, it violates federal rules limiting tax cuts states can offer if they accepted American Rescue Plan money.

Democrats say they won’t jeopardize billions in federal money.

"If the other guy was governor who's running, would this be what he does?,” asked Connecticut House Speaker Matt Ritter (D-Hartford). “Would he risk all the ARPA funds that the state has by doing this? I hope not.”

Instead, Democrats are pushing more targeted relief, including a wider Earned Income Tax Credit for the working poor and a new child tax credit. But that's risky too. It busts the state's yearly spending cap, which Lamont opposes.

All sides do agree on capping car taxes around 32 mills, meaning lower bills in about 100 towns. Seniors' pensions will no longer be taxed too.

Something everyone else in Hartford knows: the clock is ticking. Lawmakers adjourn on May 4, but Ritter says Democratic leaders are “very close” to reaching an agreement with Lamont.