Sen. Hwang: “Connecticut is unaffordable.”
May 15, 2023
Senate Republicans unveiled the largest tax-cut proposal at $1.5 billion, slightly higher than the House Republicans at $1.26 billion.
Gov. Ned Lamont called for $654 million in tax cuts in February, and he expressed disappointment when the legislature’s Democratic-controlled tax committee countered with $513 million.
While supporting tax cuts, Lamont remains cautious about whether the state can afford deeper tax cuts at the level offered by Republicans.
“I don’t like to overpromise,” Lamont told reporters. “You know, people have been promising to eliminate the income tax … at least for the last 30 years. Let’s not go there. And I also want to make sure we have the money to do significant investments in education and higher education and child care. I think we’ve got a good balance.”
All sides agree that they should reduce the state income tax, but the difference is in the amounts.
Lamont’s fiscal plan calls for cutting the income tax in two places, including lowering the 5% rate down to 4.5% and reducing the 3% rate to 2%.
When those are combined, families earning $100,000 per year would save $594 annually, which is more than Democrats’ competing plan to reduce the 5% rate to 4.75%.
Another key difference is that the Senate Republican tax cut would be retroactive to Jan. 1, 2023 — a full year ahead of Lamont’s plan. That would save taxpayers an additional $325 million.
Overall, a family of four earning $125,000 per year would save $1,045 from the Senate Republican package, including $600 from the income tax and $445 from other taxes.
A single individual with no dependents who earns $40,000 per year would save $250 from the income tax.
Child tax deduction: Unlike Lamont, Republicans are calling for a state income tax deduction of $2,000 per child for the first time in Connecticut history. Deductions for children have been available on federal tax returns for decades, and some states allows deductions or credits at the state level.
Republicans, too, favor boosting the earned income credit to 40% of the federal credit for eligible families.
Nonprofits: One of the groups expecting to receive more money than recommended by the budget-writing committee is the nonprofit organizations that provide services under state contracts. The group argues that the recommended increase of 1% by the budget committee actually represents a cut during a time of high inflation.
Senate Republicans offered the highest amount at 2.5%, which would be about $100 million over two years.
Study on car taxes: In a state that collects multiple taxes, another long-running complaint in Connecticut is the property tax on cars. The problem is that the tax rates on the same car vary widely from town to town, depending on the local mill rate.
Lamont, who lives in Greenwich, says residents should not “pay more for a Honda in Hartford than a Hummer in Harwinton.”
Multiple governors have talked about repealing the tax over the past 30 years, but that has never happened because cities and towns have complained that they would not be adequately reimbursed for the lost tax money.
In another attempt, the state Senate voted 36-0 Thursday to create a bipartisan task force of municipal leaders, tax experts and others to study the potential repeal.
Sen. Tony Hwang of Fairfield and other Republicans said that the task force needs to broaden its scope to study how to make up the lost tax income.
“Connecticut is unaffordable,” Hwang said on the Senate floor.
Sen. Herron Gaston, a freshman Democrat, said that his hometown of Bridgeport suffers from income inequality, and his constituents have complained to him about the car tax.
“It is a burden,” Gaston said, adding that lawmakers must concentrate on “making this state much more affordable for people.”