Lawmakers To Debate Tax Cuts

Back • Publication Date: April 3, 2023 • Fiscal & Economics

Gov. Ned Lamont’s proposal to cut the income tax rate for the first time in 30 years will be front and center today during the Finance, Revenue, and Bonding Committee’s public hearing.

Lamont’s budget director, Jeffrey Beckham, is expected to testify that “the governor believes it is time for broad-based tax relief.”

The state has a surplus of $1.3 billion, its fourth consecutive year-end surplus for a cumulative total of $2.1 billion over a four-year period. Most of that is due to bipartisan budget constraints put in place by lawmakers before Lamont was elected.

However, Lamont has promised to keep those guardrails in place and the legislature delivered earlier this year.

“The magnitude of the tax cuts reflects the governor’s desire to provide meaningful middle class tax relief while maintaining overall budgetary discipline and not jeopardizing the loss of federal stimulus funds,” Beckham wrote in his testimony. “In addition, by targeting relief toward working families and the middle class, these tax cuts should enhance the equity already inherent in Connecticut’s progressive tax code.”

The proposal would lower the state’s income tax by lowering the 5% rate to 4.5% and the 3% rate to 2%. In addition, the governor is proposing to permanently increase the state’s refundable Earned Income Tax Credit from 30.5% to 40%. And he wants to restore to 93.01% the personal income tax credit for pass-through entity taxes paid to the state. Restoring the credit to its original amount is expected to impact approximately 125,000 business entities, saving owners $60 million annually.

However, there are some who feel his proposal doesn’t go far enough because it doesn’t seek to expand the one-time Child Tax Credit.

Lisa Tepper Bates, president and CEO of the United Way, applauded the expansion of the EITC, but said the federal income cap for EITC eligibility is simply too low to support a large percentage of Connecticut’s middle-income families who struggle to afford the basic necessities.

She said a family in Connecticut with two children must earn less than $56,500 to qualify for the EITC, far short of what it takes to pay the bills.

She encouraged the committee to support a fully refundable state Child Tax Credit of $600 per child.

In her testimony Tepper Bates said Connecticut consistently ranks among the top five most expensive states for child at an average of $16,990 a year.

“Raising a child in Connecticut is more expensive than almost anywhere else in the country. And yet Connecticut does not have state‐ level tax policy, such as a child exemption or deduction, specifically designed to ease the financial burden of raising children,” Tepper Bates wrote.

Still others feel the overall changes are not actually helping the lower and middle class taxpayers as much as they could.

Patrick O’Brien, research and policy director for Connecticut Voices for Children, said the reduction in the personal income tax rates would cost an estimated $458 million a year, and about $376 million, or 82%, would go to low- and middle income families and about $82 million, or 18%, would go to high-income and wealthy families.

When it comes to the pass-through entity tax, O’Brien said “the proposed tax cut 2 would cost an estimated $57.5 million a year, and only about $4 million, or 7 percent, would go to low- and middle-income families and about $53 million, or 93 percent, would go to high-income and wealthy families.”

When all three tax proposals are combined, O’Brien estimated that governor’s proposed tax program would cost an estimated $557 million a year, and about $422 million, or 76%, would go to low- and middle-income families and about $135 million, or 24%, would go to high-income and wealthy families.

He said by making a few tweaks to the proposal the state use an estimated $135 million in revenue to create a fully refundable Child Tax Credit of $250 per child, up to three children, which is estimated to cost $125 million a year if limited to single tax filers making up to $100,000 and married tax filers making up to $200,000.

The Finance, Revenue, and Bonding Committee will meet at 9 a.m. today in Room 2E or via Zoom.

Authors: Christine Stuart •  Source: CT News Junkie • View