Gov. Lamont delivers budget with historic tax cuts, but cautious spending

Gov. Ned Lamont delivered a budget address Wednesday that includes the biggest income tax cut in Connecticut history, as well as added spending on schools and housing.

John Craven

Feb 9, 2023, 12:23 AM

Updated 430 days ago

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Gov. Ned Lamont delivered a budget address Wednesday that includes the biggest income tax cut in Connecticut history, as well as added spending on schools and housing. The proposal drew praise from both sides of the aisle, but critics called it too cautious.
“I want a sustainable tax cut that we can support in good times and not so good times,” Lamont told state lawmakers.
Tax relief is the centerpiece of Lamont’s two-year, $50.5 billion budget proposal. It includes the first income tax cut since 1996, targeted at the lowest two tax brackets. Single filers could keep up to $300 per year of their paycheck and joint filers would save double.
Lamont also wants a bigger Earned Income Tax Credit, which benefits the working poor. Combined with the income tax cut, families making less than $50,000 a year wouldn’t owe any state taxes.
Small businesses would also save under changes to the “pass through entity” tax, but Lamont’s budget also keeps a 10% corporation tax surcharge in place.
Even Republicans found plenty to like.
“This is a pretty decent budget. It's apparently balanced; there aren't many gimmicks in the budget. It does a lot of things that Republicans stand for,” said Senate GOP leader Kevin Kelly (R-Stratford). “Biggest sticking point is that there's not enough tax relief. I think we can also look at sales, gas, the truck tax that increases the price of our groceries. Families are struggling.”
Lower taxes are possible because the state has a huge surplus and record high Rainy Day Fund. But beyond tax relief, Lamont's new budget is cautious. Spending would go up a modest 3.5% the first year and 1.8% the following year.

What’s in the budget

- $20 million to cancel patients’ medical debt: The state would pick a charity to purchase up to $2 billion in medical debt and cancel it. Hospitals often sell debt at pennies on the dollar because collection efforts are costly.
- $135 million for local schools, far less than many lawmakers from both parties want
- $2 million dollars for a “Safe Harbor Fund” to help patients travel to Connecticut for abortions
- 255 new state troopers, who are also getting a big raise in a new contract that lawmakers recently approved
- Pay raises for state judges
- $600 million for affordable housing initiatives, including more rental vouchers and $50 million for the popular “Time to Own” program that offered up to $50,000 to first-time home buyers
But convincing many towns to even allow affordable housing is a challenge.
“I will also urge mayors and first selectmen to develop and act on a plan of their own where they will allow more housing in their community through friendlier zoning and expedited approvals,” Lamont told lawmakers. "Towns may submit their plans to facilitate housing on their terms, but doing nothing is not an acceptable strategy."
Advocates said Lamont’s budget does nothing to force communities to break down housing barriers.
“He may be looking at a carrot, but we may need a carrot-and-stick approach as well,” said state Sen. Bob Duff (D-Norwalk), the top Senate Democrat.
Connecticut also has a severe child care shortage. To combat it, Lamont is proposing a 10% funding increase for licensed day care providers. Employers that provide childcare would also receive much bigger tax breaks.

What’s not in the budget?

Lamont’s plan does not create a permanent child tax credit that many progressive Democrats are calling for. Last year, the state sent up to $750 checks to parents.
Also left out? Money to extend free bus rides, which lawmakers approved last year along with a “gas tax holiday.”
“The Fare Free program ends April 1 under federal law,” said Lamont’s budget director, Jeffrey Beckham. “In order to continue with the Fare Free program, we would have to go back to the feds.”
The governor’s spending plan also does not fund free school meals beyond this school year. On Thursday, lawmakers will take an emergency vote on funding the program through June. Many districts stopped offering free meals in the past two months when COVID-era funding ran out.
“We're seen some school districts where 40 to 60% decrease in kids getting the meals,” said Lucy Nolan with End Hunger Connecticut. “We've seen a lot of kids who are hungry.”
Top Democrats said school meals are still a priority in budget negotiations, but local school districts will likely have to chip-in too.
Speaking of schools, Lamont’s budget rebuffed calls from both Democrats and Republicans to accelerate local school funding.
“School districts are on the edge of a catastrophic fiscal cliff that may require them to lay off teachers, counselors and paraprofessionals,” said Lisa Hammersley, executive director of the School and State Finance Project.
The governor’s budget does allocate an additional $10 million for grants that will help districts address staffing shortages.
“This is funding that districts can spend on programs like supporting apprentice teachers and accelerating the pipeline for the next generation of teachers,” Lamont told lawmakers. “Earn while you learn and earn while you teach.”
Homeless advocates were disappointed in the spending proposal. It excludes $50 million that they are seeking. On Friday, the state received $18 million from the federal government for outreach and housing vouchers.
But Lamont warned lawmakers not to spend too much on additional spending – or tax cuts.
“For those of you over here, who may want additional spending, or over here, who may want a much bigger tax cut – fine. But tell me how you want to pay for it. The fiscal year ‘24 budget is tight. Fiscal ‘25 may have more flexibility if the economy holds up, so let’s talk,” said Lamont.
Legislators will also vote Thursday on extending several spending restrictions for another decade. Those “fiscal guardrails” include caps on borrowing and a “volatility cap” that limits how much capital gains tax revenue the state can spend.


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