Income tax

State income tax plan for $300 homeowners advances amid wide debate

On Wednesday, the Democratic-dominated General Assembly Finance, Revenue, and Liability Committee crafted a set of budget proposals, including an election-year extension of the Connecticut property tax credit that, since 2017, is limited to seniors and families with dependents.

Minority Republicans have failed in their efforts to increase credit beyond Gov. Ned Lamont’s proposed $300 credit for motor vehicle or home owners. A separate GOP proposal to tie future income tax exemptions to inflation was also defeated.

Although the Finance Committee’s version expands eligibility for credit, it sets stricter income limits than Lamont’s proposal. The plan advanced Wednesday would be limited to $100,000 and under adjusted gross income for couples filing jointly.

Since 1994, the credit fluctuated, reaching $500 but it is now $200 and only available to about 500,000 taxpayers. The $300 credit would be available to approximately one million taxpayers.

The committee’s version now goes to the state Senate and eventually to the House, but will first be negotiated with Lamont and legislative leaders, as part of the overall changes to the second year of the biennial budget. The second year begins on July 1. Lamont, after a mid-afternoon event in Hartford, said he was open to reviewing what the legislature is proposing.

At least five Democrats, Rep. Stephen Meskers of Greenwich, Rep. Jill Barry of Glastonbury, Rep. Kerry Wood of Rocky Hill, Rep. Chris Ziogas of Bristol and Rep. John Hampton of Simsbury, voted against the revenue package, which passed 28 -23.

State Rep. Holly Cheeseman, R-Old Lyme, a top Republican on the panel, proposed raising the property tax exemption to $500. “I believe we need to do everything we can to create a more affordable Connecticut,” Cheeseman said, recalling that in 2018, Lamont campaigned on a similar $500 credit.

But Lamont and Rep. Sean Scanlon, D-Guilford, the co-chair of the committee, both said the state is bound by federal rules that restrict tax cuts or credits due to pandemic relief. . Connecticut’s share of that money is $2.8 billion, some of which was transferred to the regular budget.

“I certainly hope we could expand the property tax credit beyond what it is today,” Scanlon said. “I don’t believe we have the ability to get there now, although I hope those in the position in the future hope to get us there in the future, once the conditions that cuff us are gone. .”

The state enjoys strong sales and income tax revenues and is expected to end the current fiscal year with a $1.7 billion surplus, prompting both sides to seek tax breaks in an election year. But outside of federal rules, economic forecasts call for deficits in 2024 to rival the multibillion-dollar shortfall that Lamont faced when he took office in 2019.

A balancing act

After Cheeseman’s First Amendment failed, she proposed a second that would tie exemptions to inflation-indexed personal income tax in the future. “As we see high inflation rates, we see how people can be pushed into a higher tax bracket just for trying to stay ahead and keep their families whole,” Cheeseman said.

Scanlon said of the proposal, “I think it’s well-intentioned and something for which there’s certainly support on this committee, I’m sure, especially even from the chairs, but it’s not something right now that we feel like we can do.

Hours later, Lamont noted that the legislature is well aware of spending and revenue limitations dating back five years that tie state government increases to economic growth. “So, I think we respect the rules that we have established. If they want to change the rules, vote to change the rules. Otherwise, I think we stick to the rules of the road,” Lamont said, stressing the need for childcare and mental health programs. “I don’t think there’s a need to break the tax cap or the spending cap.”

Lamont outlined a balancing act of tax relief in the $24 billion budget for fiscal year 2023, which he is willing to negotiate as long as they stay within limits and as long as they are sustainable over the long term. .

“Maybe they don’t want to do car tax,” Lamont said. “Just tell me what you want to replace. Which tax reduction do you want to get rid of? You know where I am on property tax. You know where I stand on the car tax. You know where I stand on eliminating income tax on 401(k)s and pensions. If you don’t like any of these tax cuts, if you think you have a better one instead, we’ll talk about it.

Motor vehicle tax changes

The finance panel on Wednesday also rewrote Lamont’s proposed tax rate for statewide passenger vehicles, which would limit state and municipal taxes to $29 per $1,000 of assessed value. , or 29 mills, and would reimburse municipalities for lost revenue.

Under the legislative plan, proposed as an amendment by Sen. John Fonfara, D-Hartford, co-chairman of the committee, ratepayers in cities and towns with mill rates of 29 or more would receive $5,000 exemptions on the value of their personal motor vehicles. , at a cost to the state of approximately $250 million.

“I have to assess that,” Lamont said when briefed on the committee’s action. “I’m the guy who has to make sure the numbers add up. If they add up, we talk about it.

In an easier bipartisan vote, the panel also approved a capitol budget which would be paid for by long-term loans. He also massively approved legislation create a training program to support people who want to obtain commercial operator licenses at a time when there is an acute need for truck drivers.

Senate Minority Leader Kevin Kelly, in a joint statement Wednesday with his top aides, criticized Democrats for waiting minutes before the meeting was scheduled to start at 9 a.m. to release details of the revenue package.

Kelly favors a temporary sales tax cut, which would offer less relief to most families but be more immediate, unlike the state income tax credits, which families would see in early 2023. .

“To receive this at the last minute is an attempt by Democratic leaders to rush a vote and limit time for consideration and discussion,” Kelly said. “What they should be rushing is giving immediate tax relief to residents. Instead, they are rushing through a package that offers no relief for at least another year… By rushing this today, they are trying to silence the voices of those who want tax relief more important and faster for the workers and the means. class families struggling today.

[email protected] Twitter: @KenDixonCT