Lawmakers on the Finance Committee defended a package of tax cuts proposed by Gov. Ned Lamont during a Monday hearing in which a progressive think tank argued that Connecticut should do more to offset the tax burden of low and middle income parents.
Lamont, a Democrat, proposed around $500 million in tax cuts as part of the two-year budget plan he submitted to the legislature back in February. Among the cuts are proposals to reduce the two lowest income tax brackets from 5% to 4.5% and from 3% to 2%. Due to the way Connecticut’s tax system is structured, the income tax relief would extend to both high and low income earners.
Other elements of Lamont’s plan include increasing the Earned Income Tax Credit for the working poor from 30.5% to 40%. A third proposal would restore a personal income tax credit for pass-through entity taxes, saving business entities an estimated $60 million a year.
The governor’s tax package has broad support in the legislature including from minority Republicans. House Minority Leader Vincent Candelora was among the first to offer supportive testimony during a Monday public hearing.
“Essentially, what I support and what I think many members of my caucus support is this targeted tax relief, broad-based on the income tax for our lower income payers,” Candelora, R-North Branford, said.
Support for the cuts are not limited to Republicans. In fact, the progressive policy organization Connecticut Voices for Children also testified in favor of the governor’s bill on Monday. However, members of the organization argued the proposal should be amended to include income ceilings for some of the cuts in order to fund a permanent child tax credit.
“We are the only state with an independent income tax that does not adjust for the cost of raising a child,” Patrick O’Brien, the group’s research and policy director, said. “This is important because everyone understands the idea of tax fairness.”
A childless family earning $100,000 a year has a greater ability to pay taxes than a two-child family making the same income, O’Brien said.
Passing a permanent child tax credit has been a priority for many legislative Democrats, who last year adopted a temporary rebate of $250 per child. In order to pay for an ongoing child credit, members of the group proposed to scale back some of Lamont’s tax cuts for wealthier residents and businesses.
The governor’s administration has favored the broad-based cuts over a child tax credit and during the hearing, his budget secretary, Jeffrey Beckham, told the finance panel that Connecticut already had a “steeply progressive income tax.”
“As a state, we need to be mindful of the competitive market place in which we operate,” Beckham said. “Nine of our sister states have no income tax at all. So we need to keep in mind who pays income tax and we need to retain those citizens in our state.”
Republican legislators made similar arguments later in the hearing in response to O’Brien’s testimony.
“I see this — your comments — really is just ‘Tax the rich’ and I don’t think that is necessarily a good thing,” Rep. Lezlye Zupkus, R-Prospect, said. “Because rich people can afford to leave and they will leave and they do leave and then what happens?”
For his part, O’Brien rejected claims that Connecticut already had a sufficiently progressive tax structure.
“Right now, our tax system is exacerbating income inequality and it’s also exacerbating racial and ethnic income gaps,” he said. “So to the extent that we’re calling for fair tax proposals, we want to stop that current unfairness.”
Sen. John Fonfara, a Hartford Democrat who co-chairs the finance panel, agreed that the state had a regressive tax structure but he worried that the group’s proposals failed to grow Connecticut’s economy.
“We want higher income earners here and we want them buying things, we want them to hire people if they have a business,” Fonfara said. “We educate as well as any in the country and I don’t know about where you live or where you spend your time, but I don’t see too many cranes in the air in Connecticut. Go to Boston, go to other places and there’s plenty of cranes.”