Sen. Harding: “Making govt operate more efficiently.” Sen. Looney: Raise CT Income & Property Taxes
October 23, 2025
CT officials ask: Could tax cuts and credits counter federal aid loss?
Any state tax cuts face political obstacles
By Keith Phaneuf
Connecticut officials’ efforts to invest state money in shrinking federal human service programs are encountering more legal and technical challenges than anticipated, so the focus has begun shifting to another type of aid: state tax cuts.
While there are no legal obstacles blocking the state government from putting more dollars back in household budgets, the political challenges remain plentiful.
Senate President Pro Tem Martin M. Looney, D-New Haven, this week called for Connecticut to again consider creating a new child tax credit within the state income tax system.
The most popular proposal in recent years would send as much as $1,800 annually into low- and middle-income households.
But paying for it would cost the state hundreds of millions of dollars at a time when Connecticut legislators still may have some options to help working households afford health care, food and other necessities.
So, Looney again is challenging his fellow Democrats in the legislature’s majority and Gov. Ned Lamont to consider boosting state taxes on Connecticut’s wealthiest households, which recently became the recipients of enormous federal income tax relief.
House Republicans also want to slash taxes dramatically. Their plan to bolster middle-class income tax refunds by as much as $700 per year would be one of the largest state tax cuts in Connecticut history.
But to do so, Republicans would have to scale back, at least somewhat, very aggressive efforts Connecticut has made since 2017 to pay down a huge pension debt that dates to the late 1930s.
“We are under enormous pressure,” Looney said, from both from an Oct. 1 federal government shutdown that immediately imperils nutrition and energy assistance programs and ongoing federal cutbacks that threaten these programs and key health care initiatives going forward. “The state is likely going to have to be more dependent on its resources.”
The fiscal policy bill that Congress and President Donald Trump approved in early July would strip almost $1 trillion from Medicaid, other human services, green energy and student loan programs over the next decade.
One of the most painful cuts, Looney noted, involves changes to federal tax credits starting Jan. 1 that will cause premiums to spike for millions of Americans who buy health coverage on Affordable Care Act exchanges.
About 150,000 Connecticut residents purchase coverage through Access Health CT, and about 90% of those benefit from a federal subsidy. Legislators here fear many residents will see their monthly premiums grow by hundreds of dollars.
But the budget cuts would offset a portion of federal tax cuts worth more than $4.3 trillion through 2034, a relief plan tilted heavily in favor of wealthy households.
Taxing the rich to fund middle class relief? Easier said than done
Given that, and Connecticut’s need for resources, Looney said he would reintroduce two state tax hike proposals aimed at the state’s wealthiest residents.
The first would boost state income tax rates on the capital gains earnings of Connecticut’s richest households. The Finance, Revenue and Bonding Committee endorsed this plan last year, which would have added a 1.75% surcharge on the capital gains earnings of individuals whose overall income exceeds $1 million and on couples topping $2 million. But the proposal was excluded from the final budget compromise between Lamont and the General Assembly.
Looney also said he would introduce what’s commonly called a “mansion tax,” a statewide levy on high-value residential property. Last year he proposed a tax of two mills on properties assessed between $3 million and $5 million and three mills on those assessed at more than $5 million. (One mill generates $1 of tax revenue for every $1,000 of assessed value.) The measure died in the Finance Committee.
These hikes, the New Haven lawmaker said, would capture only a portion of the federal tax cuts wealthy Connecticut households are receiving.
And these proposals would draw strong support from progressive groups that argue Connecticut’s state and municipal tax system already heavily favors the wealthy.
The state’s last tax fairness study, released in 2024, found the lowest-earning 10% of Connecticut households effectively spent almost 40% of their income in 2020 to cover state or municipal tax burdens, more than five times the rate faced by Connecticut’s highest earners and more than twice the statewide average.
Looney released 2023 state income tax data this week from the legislature’s nonpartisan Office of Fiscal Analysis that showed Connecticut’s wealthiest towns reported an average, adjusted gross income per filer 15 times or more than of those in the state’s poorest cities.
“The impact to Connecticut families from the federal cuts will devastate already struggling families into a deeper crisis if Connecticut leaders don’t take bold decisive action now,” said Norma Martinez HoSang, director of CT For All, a grassroots coalition of more than 60 faith, labor and other civic groups. “In order to have sustainable revenue, we must pass progressive revenue policies that ask the ultra-rich and big corporations to pay their fair share, reversing the massive transfer of wealth to the top 1%.”
But the proposed state tax hikes almost certainly would spark fierce opposition, including from some of Looney’s fellow Democrats.
Lamont, a fiscal moderate, has blocked repeated efforts to boost taxes on Connecticut’s wealthiest, arguing they would flee the state.
Carol Platt Liebau, director of the Hartford-based Yankee Institute for Public Policy, called any state tax hike proposal a “non-starter” and agrees that it only would prompt rich households to relocate.
“We don’t want to drive people to Florida or to move to [other] tax-friendly states,” she said. “We want all of the people of Connecticut to be able to stay here and flourish here.”
But Looney said he’s hopeful the pain caused by federal budget cuts will challenge Lamont, other moderate Democrats, and Republicans to reconsider their longstanding opposition to financing middle-class tax relief with increases on the rich.
“Our unmet needs are growing all the time,” he said. “We need to just take a fresh look at our situation and be grateful we are in a situation better than many other states.”
Rep. Josh Elliott of Hamden, a progressive Democrat who is challenging Lamont for the 2026 Democratic gubernatorial nomination, said the legislature’s Democratic majority “is already there on this issue. We’ve been there on the issue of tax fairness before it was even acute.”
The fate of any tax redistribution plan, he added, hinges on Lamont.
“Does the governor actually care about working families?” Elliott said.
Lamont’s office reminded reporters this week that the governor signed the largest state tax cut in history into law in 2023, sending about $300 back to most middle class families while boosting the state income tax credit for the working poor to one of the highest of any state.
House GOP tax cut would slow, not stop, paying off pension debt
Even if Connecticut doesn’t ask more from its wealthiest households, there are other options to provide relief.
But they also face political obstacles.
House Republicans on Tuesday proposed boosting a state income tax credit that offsets a portion of middle-class filers’ property tax bills from $300 to $1,000 at a cost to the state of about $500 million per year.
At first glance, Connecticut could cover that bill without raising taxes.
State government has averaged annual surpluses topping $1.8 billion since 2017, part of an aggressive effort to build reserves and whittle down tens of billions of dollars in pension debt accumulated by 1939 and 2010.
Spending $500 million on tax relief likely still would leave significant funds to reduce pension debt, which still topped $35 billion entering last fiscal year, according to Lamont’s budget office.
But some officials remain cautious about any interruption in Connecticut’s ongoing war against its legacy pension debt.
Lamont spokesman Rob Blanchard said this week that the governor “is supportive of policies or ideas that make life more affordable and reduce burdens on middle-class and working families,” but he didn’t weigh in directly on the House Republican plan.
Senate Minority Leader Stephen Harding, R-Brookfield, said his caucus also hasn’t taken a position on the tax cut offered by House Republicans but said cutting taxes is “a much, much better option” than increasing state spending to cover shortfalls in federal human services programs.
Harding added, though, that Senate Republicans remain strong supporters of Connecticut’s efforts to pay down its huge pension debt, and this effort shouldn’t be reduced without careful consideration.
“Our focus,” he said, “should be on making our government operate more efficiently.”