Is it the same as a tax hike or just bad policy?
Gubernatorial candidate Bob Stefanowski and other Republicans insist Governor Ned Lamont raised taxes by $900 million a year in his first budget — not a record, but one of the largest in recent history.
Democrats counter that it was closer to $250 million — low on the list of all-time hikes — and that Lamont never raised income taxes.
The $650 million dispute revolves around a big question: Whether state officials order tax cuts, campaign, and then repeal them after Election Day but before taxpayers benefit, s a tax hike? Is it just annoying but not harmful?
The debate is ongoing in this year’s regional elections.
Democrats, who have controlled the governor’s office since 2011 and the legislature for decades, reject the “tax hike” label. A reversed tax cut may be disappointing, but you can’t lose something you never had. Public finances fluctuate every year and most taxpayers are savvy enough to understand, they say.
Republicans not only call these measures tax hikes, but insist that they destroy household and business financial confidence, weaken the economy and slow job growth.
“When you pass a law, it should mean something,” Stefanowski said. “But with one party, Democratic control, that unfortunately means nothing. Map of families, residents and businesses. They make decisions based on what they are going to absorb.
Democrats: The GOP is simply twisting the truth
Lamont countered that the GOP line is simply incorrect. He inherited a multi-billion dollar budget in red ink and turned it into a huge surplus with pink projections for the year.
And while those who served before him may have overshot their tax-cutting policies, Lamont added, “I have a budget in place … which is built not only for this fiscal year or the next fiscal year, but I think that gives us a lot of stability and certainty for small businesses and families.
When Lamont took office in January 2019, the Legislature’s nonpartisan Office of Budget Analysis warned that state finances, unless adjusted, were poised to run an average deficit of $2.2 billion in each of fiscal years 2019-20 and 2020-21.
To help make up for this shortfall, Lamont and the legislature added a 1% surtax on prepared meals, expanded what is subject to the 6.35% sales tax, reduced a tax credit for small and medium-sized businesses and imposed a 10-cent tax on plastic. Bags.
They also ordered a new highway use tax on certain commercial trucks, effective January 2023.
But they also delayed or canceled new or expanded tax breaks for retired teachers, property tax owners without dependents, and college graduates with science, technology, engineering or math degrees.
The scheduled expiration of a temporary corporate tax surtax – which was renewed several times throughout the 2010s – has been further delayed.
But the biggest undone tax cut was a $516 million hospital tax cut that even many in the hospital industry were skeptical they would ever see. The undone reduction was partly offset by additional payments to industry.
Yet the net increase in state revenue from hospitals was $417 million a year.
In total, the cancellation or postponement of previously approved tax cuts saved the state more than $620 million in each of the first two fiscal years of the Lamont administration.
“It’s misleading to try to call this a tax hike,” said Senate Speaker Pro Tem Martin M. Looney, D-New Haven. “A tax hike takes an existing rate and increases it.”
Both Looney and Lamont noted that the rollback of the tax cut for hospitals was part of a larger deal hailed by the Connecticut Hospital Association. And through this agreement, they added, the state not only settled a long-standing legal dispute with the industry, but also shielded taxpayers from hundreds of millions of dollars in potential legal liability.
Taxpayers are sophisticated enough, Looney said, to understand that. “People should be aware that when a situation is volatile, action needs to be taken.”
The Senate leader added that Republicans are using another trick to exaggerate tax increases: offering two-year totals as one.
State government budgets operate in two-year cycles, and legislators often use biennial totals, especially when it is politically advantageous to make a figure appear larger.
Some Republicans don’t say Lamont’s first budget raised taxes by $900 million, but instead say it was a $1.8 billion hike — not mentioning that he was is a two-year estimate.
“I think it’s a political stunt, to a large extent,” Looney said. “It makes it more dramatic.”
Republicans: Democrats are masters of tax baiting
Republicans counter that when it comes to political stunts and taxes, Democrats wrote the book. The decade of the 2010s, according to the GOP, was marked by the Democratic version of the tax bait.
It goes like this:
Ahead of an election, Democrats are voting to cut taxes — effective in the next term — ignoring projected budget deficits much larger than promised relief.
After elections, most tax cuts are then reversed or suspended on the grounds that the state cannot afford them.
For example, when Democratic Gov. Dannel P. Malloy campaigned for re-election in the summer of 2014, he had already enacted more than $235 million in tax relief for consumers, businesses, the working poor, taxpayers single earners and retired teachers. – which was to begin after the elections.
The governor claimed that nonpartisan analysts’ warnings of slow growth and a $1.3 billion deficit in the first post-election budget were simply wrong.
Malloy and his Republican opponent, Greenwich businessman Tom Foley, had pledged not to raise taxes after the election.
Malloy won, the state budget situation had not improved, and he and the legislature reversed or delayed nearly all of the $235 million in previously approved tax cuts — except for an $11 million tax break for retired teachers — and ordered an overall state net tax increase of more than $670 million a year.
Big companies like General Electric, Aetna and Stanley Works all warned as this budget was being drafted in June 2015 that it could drive companies out of state. The following January, GE announced that it was moving its global headquarters from Fairfield to Boston.
These baiting and election-cycle-changing maneuvers have “reinforced cynicism and likely made people more likely to move to low-tax states,” said Ken Girardin, director of policy at the Yankee Institute, a Hartford-based conservative political group.
Fred Carstensen, who directs the Connecticut Center for Economic Analysis at the University of Connecticut, says this back-and-forth tax policy shouldn’t be called a “tax hike” – but it’s not always harmless.
The 2019 decision to delay reinstating a $200 income tax credit for middle-class households without children may have been annoying, but it didn’t drive families out of the state. , Carstensen said.
But the postponement of tax breaks for college graduates in technology and engineering may have led some of Connecticut’s brightest to take jobs in other states, he said.
More importantly, big business seeks stability in state fiscal policy. It’s a problem “if companies can’t make a reliable five-year projection,” Carstensen said. “And Connecticut is just an incredibly volatile environment.”
Cities and towns recall broken tax relief promise
Businesses and households aren’t the only ones who have been stripped of approved tax relief before they can claim most of it.
The 2015 legislature approved a plan to dedicate half a penny of Connecticut’s 6.35% sales tax to cities and towns.
Even as the legislature passed the plan, nonpartisan analysts warned that when the program is fully implemented in 2018, the budget faces a built-in deficit two and a half times larger than the promised funding.
Democrats nevertheless signed it into law and campaigned hard on the program in 2016, saying revenue sharing would help communities lower property taxes.
But after the elections, state finances remained strained. Municipalities that were promised nearly $250 million in 2017 actually received $185 million — and only after existing municipal grant programs were cut by $100 million to help balance the books of the economy. ‘State.
In 2018, when more than $360 million in sales tax revenue was to be transferred to the revenue sharing account, the program was put on hold. Lawmakers put in place three grants that shared about $115 million with cities.
Many elected municipal officials remember it as a disappointment.
“Cities rely on predictable revenue streams … to operate efficiently,” said Betsy Gara, executive director of the Connecticut Council of Small Towns. “Every time the state ends up waiving a program or significantly changing a program, it creates difficulties at the local level.”
Lamont: CT’s finances will be fine going forward
Lamont said it was valid for taxpayers to be frustrated by “making promises you can’t keep, which is the history of this state.”
But the governor added that while he inherited some tax-cut promises that shouldn’t have been made, he hasn’t overstretched state finances for the future.
Republicans have criticized the $663 million in tax cuts that Lamont and his fellow Democrats in the legislature have approved this year. Although this is one of the largest tax cuts in state history, Republicans note that more than half of the relief is one-time and modest, given the $3.1 billion Connecticut has in its Rainy Day Fund and the $3.9 billion projected budget surplus for the fiscal year ending June 30.
But that tax cushion, the governor adds, should help Connecticut keep its tax promises.
If the state faces “a normal recession,” he said, “we’re going to be in really good shape.”