State budget deal includes major tax cuts and longer gas tax holiday

Connecticut residents could see more than half a billion dollars in tax cuts under a budget deal announced Thursday between Gov. Ned Lamont and fellow Democrats. The deal also extends the state gas tax holiday until Dec. 1.

John Craven

Apr 27, 2022, 10:11 PM

Updated 756 days ago

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Connecticut residents could see more than half a billion dollars in tax cuts under a budget deal announced Thursday between Gov. Ned Lamont and fellow Democrats. The deal also extends the state gas tax holiday until Dec. 1.
"We hear you, Connecticut," said state Rep. Sean Scanlon, (D-Branford). "We hear you that you want help -- that you want Connecticut to be more affordable. And this package delivers on that."
The package targets most tax relief at families, seniors and the working poor:
• Property tax credit: Increases from $200 to $300. Plus, most homeowners could now claim it.
• New child tax credit: $250 per child (up to three kids) for individuals making up to $100,000 a year or couples making up to $200,000 annually.
• Retirement income will no longer be taxed.
• Earned Income Tax Credit: expanded from 30% to 41.5% of the federal EITC.
• New income tax credit for college loan debt worth $10 million.
But some of the tax relief is only temporary. For example, the new child tax credit and EITC is only for one year. Lawmakers will revisit the idea next year.
And then there's the car tax. It would be capped at 32.46 mills (1 mill equals a dollar for every $1,000 of a car's assessed value), dropping bills in around half of Connecticut's towns. Drivers in high tax cities like Bridgeport would see a major drop. In that city, the owner of a car assessed at $25,000 would pay $217 less under this plan.
Republicans say the relief isn't enough. Their plan cuts income taxes for everyone by a full percent and includes deeper property tax cuts.
"We came out and talked about how we can provide immediate tax relief to Connecticut families," said state Sen. Kevin Kelly (R-Stratford), the Senate minority leader. "Connecticut families are experiencing a 40-year high in inflation."
But Democrats say the GOP plan jeopardizes billions of dollars from Congress -- part of the American Rescue Plan. ARPA limits how much states can spend on tax relief.
"The first question is, what happens a year or two from now? We're not sacrificing fiscal discipline while we make these investments in early childhood or mental health," said Rep. Matt Ritter, the Democratic state House speaker.
Republicans believe the ARPA restrictions are unconstitutional, and say Connecticut should join 18 other states in a lawsuit challenging them.
The proposed budget makes a $100 million investment in child care and more money for struggling nonprofits, all while still paying down $2 billion in pension debt.
In all, the budget spends $24 billion, a 2.5% increase over last year. But lawmakers have a lot more money to work with this year, with the federal relief money plus surging sales tax revenue due to inflation. The deal does not violate the state's mandated spending and stock market volatility caps, according to the governor's budget secretary.
Top Democrats said some details remain unresolved, like how much federal money to contribute to the state's Unemployment Trust Fund. The move will save small businesses money. Lawmakers are still debating how much pandemic pay to allocate as well.
The full General Assembly may start voting on the budget as early as Saturday. They adjourn next Wednesday.


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