NB Politicus

“Tax Equity” Proposals Call For Reducing Regressive Sales and Property Levies, Raising Rates On Wealthy

Posted in Governor, state budget, state government, Tax Policy by nbpoliticus on March 21, 2021

By John McNamara

Bills that would dramatically alter the way Connecticut taxes individuals and businesses were the subject of a marathon hearing at the Legislature’s Finance, Revenue and Bonding Committee on March 15th.  An overwhelming majority of the more than 300 individuals who testified supported tax reforms but passage will face significant hurdles in the 2021 session.

The “tax equity” proposals, co-sponsored by New Britain Democratic legislators State Senator Rick Lopes (D-6), State Rep. Manny Sanchez (D-24), State Rep. Bobby Sanchez (D-25) and State Rep. Peter Tercyak (D-26) and other lawmakers, provide tax relief to low- and moderate income households by reducing reliance on regressive sales and property taxes. High-income households would be taxed more than the current maximum of 6.99%. on their incomes to make up the difference.

A key provision contained in HB 6187 and SB 821 would adjust the state income tax on individuals earning $500,000 or more and joint filers earning $800,000. Proponents say the adjustments would make income tax rates fairer by raising the rate to 8.82% for individuals at $500,000 and joint filers at $800,000. For households earning $1 million or more the rate would rise to 12.69 percent. Governor Ned Lamont opposes any change in the current rates but a significant contingent of lawmakers. in the Democratic caucus are pushing changes to lower the overall tax burden on individuals and families below $500,000. Raising rates on wealthier households would generate $1.75 to $2 billion annually.

A coalition of unions and advocacy groups that mobilized turnout for the all day March 15thhearing assert that legislation would level the playing field and make the tax system fairer. According to a Voices for Children tax reform report “Advancing Economic Justice Through Tax Reform” issued last December, median income households with $76,106 in pre-tax income pay an effective tax rate of nearly 14% while the top one percent of tax filers with an average income of $3,092,389 have an effective tax rate of 6.5%. The effective tax rate takes into account the total tax burden of property, sales and income taxes on taxpayers. It means that a nurse or salesperson earning less than $100,000 now pays double the taxes comparably to wealthy individuals whose burden has been reduced further in recent years as the result of the Trump tax cuts for the “one percent” with incomes in the millions and billions.

A 2% statewide property tax “on the portion of the market value of homes in excess of $1.5 million” also dubbed the “mansion tax” drew opposition at the legislative hearing from worried homeowners, most of whom would not be effected by the levy on only the highest value residences. The tax on “mansions” with assessed values exceeding $1 million would raise $663 million. The same “mansion” tax is proposed in SB 171 with State Senate President Martin Looney sponsoring the stand alone bill.

Tax relief for the working class is part of the comprehensive legislation with an expansion of the Earned Income Tax Credit (EITC) to 50% of the federal tax credit at an estimated cost of $155 million. The Senate version of the bill also includes a state child tax credit similar to federal Rescue Act one designed to reduce child poverty. For property tax relief the tax credit would double to $400 on homes and motor vehicles at a cost of $63 million.  For COVID 19 relief a direct payment of $500 would be sent to individuals who have faced hardships and unemployment over the last year.

The Finance committee is also considering other provisions of the tax equity legislation that would generally lower the tax burden on working and middle income residents:

  • A 10% tax on digital ads placed in Connecticut by companies with digital ad revenue of more than $10 billion (Google, Facebook, and Amazon) generating $140 million annually.
  • Lowering the estate tax exemption to $2 million, eliminate the payment cap, and enact estate tax rates similar to the rates in effect before the Great Recession. This would generate approximately $162 million annually.
  • Increasing the base corporation business tax rate to 11.5% for corporations with gross income of $100 million or greater and extend and increase the current surtax to 20%. This would generate approximately $250-300 million annually.
  • Imposing a surtax of 5% on capital gains, dividends, and taxable interest for individuals with income in excess of $500,000 per year ($800,000 for joint filers). This would generate approximately $850 million annually.

Proponents of the legislation face a considerable amount of misinformation about impacts on working and middle income households whose effective tax rates would stand to be reduced by passage.  Any tax adjustment in the direction of equity always elicits arguments that the big taxpayers that the state depends on would flee like snowbirds to Florida and that businesses would go offshore if they haven’t already to avoid paying more taxes. Standing in the way of any change and buying into those arguments is Governor Lamont who made a “no new taxes” pledge to the Connecticut Business and Industry Association last week.

It remains to be seen how much the Democratic caucus and its leaders can move Lamont to support one or more of the provisions intended to reduce regressive taxes and make Connecticut’s tax system more equitable. Some are hopeful that Lamont will take a page from President Biden who is now calling for a higher rate on wealthy individuals making over $400,000 for public investments like infrastructure and to address a spiraling federal deficit from the Trump years. 

For now the Finance, Revenue and Bonding Committee, co-chaired by Hartford State Senator John Fonfara and Shoreline State Rep. Sean Scanlon, has its hands full in sorting out what provisions will move to a full vote in the General Assembly this session.

 

“Revolutionary” State Budget? Property Tax Relief, New ED Aid For NB Is Part of Democratic Package

by John McNamara

A tentative agreement among Democratic leaders on a biennial state budget  that begins July 1st appears to be good news for New Britain and other municipalities in terms of property tax relief and continued aid to the under-funded city schools.

Late Saturday (May 31) Democratic legislative leaders and representatives of the Malloy Administration agreed on a revenue package that will drastically cut the car tax. The measure will set aside the city’s property tax rate of 49 mills on vehicles and cap the tax for cars to no more than 29 mills in a statewide formula.   The levy on vehicles will be in effect for the 2015 tax year if OK’d in a final vote. At the same time the plan will designate a percentage of sales tax revenue for transportation and new funding to cities and towns to reduce burdens on property taxes.

New Britain's legislative delegation will wrap up the 2015 session June 3. From left Rep. Bobby Sanchez (25), Rep. Peter Tercyak (26), State SenatorTerry Gerratana (6) and Rep. Rick Lopes (24). Absent from photo is Rep. Betty Boukus (22)

New Britain’s legislative delegation will wrap up the 2015 session June 3. From left Rep. Bobby Sanchez (25), Rep. Peter Tercyak (26), State  Terry Gerratana (6) and Rep. Rick Lopes (24). Absent from photo is Rep. Betty Boukus (22). ( F Gerratana photo 2014)

The Democratic package, if approved by the Legislature, represents the most significant change in Connecticut’s tax structure in decades, making the system more progressive and fairer to New Britain and other cities.

Taxes will most certainly  increase by a smidgen for high-income individuals with the ability to pay. For most citizens burdened by one of the nation’s heaviest property tax burdens there is relief.  State Senate President Martin Looney (D-New Haven) called the proposal “revolutionary” and said “this budget meets the state’s obligations and provides historic property tax relief for the people of Connecticut,”  It includes provisions to:

–  Raise the income tax rate on millionaires from 6.7 to 6.99 percent

–  Maintain the state sales tax at 6.35 percent and designating half a percent each to local property tax relief and the Malloy transportation initiative. Proposed sales taxes on accounting, engineering, advertising and dry cleaning were eliminated from the plan.

– Triple the tax on computer and data processing from 1 to 3 percent.

– Adjust Payment In Lieu of Taxes (PILOT) grants to municipalities with high mill rates where state property and nonprofit institutions hold significant amounts of property.

As the legislative session ends New Britain’s legislators have been mobilizing to retain a fair share of municipal aid,  support state-funded programs and maintain New Britain’s share of education funding.

Details will be forthcoming over the next several days, but it is likely that the delegation has succeeded and the city will improve on the $85 million (covering 68%)  it now gets under state cost sharing formula to underwrite the education budget proposed by the Stewart administration at a flat-funded $124,183,673.

Despite billion dollar deficits confronting the Malloy administration and legislators in  state budgets since 2011, New Britain’s education aid has steadily increased over the last four years.  It will do so again if the budget package wins approval by Wednesday, June 3.

To be sure New Britain schools will remain under-funded in comparison to comparable communities in the absence of more equity in the way educational funding is distributed. The state budget package now on the table, however,  is a step in the right direction.  New Britain has fallen behind more sharply than others because of a consistent pattern of the city setting budget priorities that stiffed the schools year after year, but increased spending in municipal government. This year is no exception.

Attention now turns to the adoption of the municipal budget. The Common Council is due to act on  the Stewart Administration’s $224,757,851 budget and 49 mill tax rate by mid-June.  No matter how the city acts there is now room for optimism on property tax relief and education aid given the prospect of a “revolutionary” state budget plan being adopted.

Sunshine On State Budget: Lembo Launches Open Connecticut

Posted in Comptroller, state budget, state government by nbpoliticus on January 14, 2013

Score one for State Comptroller Kevin Lembo on the government and transparency front to start 2013. .

Lembo has launched a new website for the public to get an unabridged and politically neutral one-stop source for where state government spends its money, gets its income and borrows. If there are inefficiencies or redundancies to root out as CT faces billion dollar budget deficits this is the place to find it. “Sunshine,” the Justice Louis Brandeis famously said, “is the best disinfectant.”

Open Connecticut is more comprehensive than the website served up by the Yankee Institute — a right wing think tank — that paints state employees with a broad brush whether they are earning their keep or notand uses data to tear down government  

According to Lembo’s office Open Connecticut — www.osc.ct.gov/openct —centralizes state financial data and simplifies access to important information about the state budget and its financial future.


Here’s more from the Comptroller’s Office:

“It’s your money, and you have a right to know,” Lembo said. ‘That’s the simple message behind Open Connecticut. ‘Pockets of state financial information have long been available, but scattered across state agencies. Those who actually have the time to locate information often discover the next difficult step – understanding the information. ‘Through Open Connecticut we want to accomplish at least two things – we want to end the scavenger hunt for taxpayers by creating a centralized warehouse for financial information, and we want to help explain and break down the state’s financial processes as simply as possible. ‘We want to help answer basic questions that the public may have – and deserves to know – about state government. For example, what exactly is in the state budget? Where did our deficits or surpluses come from? How much did we spend on a particular vendor or program? And what should we expect in future years?” Open Connecticut is currently organized into seven sections: STATE BUDGET: Provides access to the state budgets for current and previous years, annual end-of-year financial reports, deficit mitigation plans and results-based accountability (RBA) reports that serve as report cards on how state money was spent on certain projects. STATE INCOME: Features monthly reports by the Department of Revenue Services on the amount of state revenue received, as well as reports on income tax collected by bracket and by town. STATE BORROWING:  Provides access to the state’s Bond Allocation Database, which contains information about projects approved by the State Bond Commission. This section also features background about the State Bond Commission, its members and how the bond authorization and allocation process works.  FUTURE COST OBLIGATIONS:  Provides background and links to actuarial reports on the state’s various retirement systems and retiree health care (known as the Other Post-Employment Benefits (OPEB) report). FOLLOW THE MONEY:  Features links to transparency.ct.gov, an existing searchable website maintained by the Office of Fiscal Analysis (OFA) that already provides information (from the Office of the State Comptroller (OSC)) about employee salaries, vendor payments, retiree pensions and other detailed information about state spending. FINANCIAL FORECAST:  Includes links to monthly independent financial forecast reports by the OSC, OFA and Office of Policy and Management, as well as links to fiscal accountability reports and consensus revenue projections.  TAX BREAKS & EXEMPTIONS: Provides links to reports by OFA and Department of Economic and Community Development on the cost of tax expenditures and evaluations on certain tax credit and abatement programs. Open Connecticut also features brief tutorials on issues such as Generally Accepted Accounting Principles (GAAP), the state spending cap and consensus revenue. “This site is by no means a finished product – but a starting point towards greater transparency and connectivity between the public and state government,” Lembo said. “My goal is to see this site evolve and expand to include more information as it becomes available. I encourage state residents to use the site, to better understand their government – and to let us know if they have ideas to improve the site going forward.” Lembo, as state comptroller, is the state’s chief fiscal guardian. In that capacity he monitors state finances and issues monthly and annual financial reports. Elected in 2010, Lembo previously served as the state’s Health Care advocate..

 

GOP "Common Sense" Plan: Hypocrisy Thy Name Is Republican

Posted in state budget, state government by nbpoliticus on October 9, 2010

A key phrase from a new state government agenda from Republicans is: “Borrow only what you can afford to pay back”. Minority Leader Larry Cafero and the crafters of this “common sense” plan conveniently forget to mention that a Republican has held the Governor’s office for 20 years. The Governor has sole and exclusive control over state borrowing. Blaming the Democratic majority for all state budget problems strains credulity.  The executive branch is a co-equal and some would argue more powerful branch when it comes to the public purse.


There is nary a word about changing the tax structure to ease the burden on the property tax to pay for education. That real reform would offend corporate special interests and the folks who have the long driveways in the tony towns of the Nutmeg state who don’t want the tax burden made fairer. Working and middle class taxpaying families get no comfort or relief from the drivel in this platform.  Hypocrisy thy name is Republican.


Take a look yourself at www.commonsensecommitment.com

State Budget: The Sunset Solution

Posted in state budget by nbpoliticus on July 3, 2009

The July 4th holiday will come and go without a state budget in place for the fiscal year that began last Wednesday. The state House and Senate finally hammered out a plan that didn’t muster a veto proof majority in either chamber. A disengaged Governor suddenly got engaged in the last week of the 2009 FY to negotiate. At least the posturing stopped but the word out of the mansion on Prospect Avenue as we went to get our hot dogs for the weekend was “impasse.”

The deal breaker still appears to be the Governor’s opposition to inching up the state income tax for households making $500,000 or more a year. The irony in all of this is that the Governor less than three years ago came out for $2 billion in tax hikes to fund her education initiatives going considerably beyond current state obligations. State Rep. John Geragosian (D-New Britain), the House appropriations chair and part of the current negotiations, quipped at the time that she sounded like “Franklin Delano Rell.” If there is a moral or policy compass to Rell’s style of governing it hasn’t shown up since she took over from John Rowland.

Good economists, including ones the Governor employs over at UCONN, don’t hold much sway with Rell or Moody or Genuario. Their arguments are easily lost in the “no new taxes” mantra but include:

-Connecticut state government is no where near the top tier in spending per capita despite the almost total absence of county or regional taxing authorities;

-the Jim Himes crowd down in Fairfield County is taxed proportionately less than your middle income household in Berlin and New Britain when all local, state and federal taxes are considered.

One possible deal maker — sunsetting taxes and cuts to meet the crisis — has barely been mentioned in the back and forths since last April when legislative committees unveiled the first tax and spending plans.

Former state Rep. Astrid Hanzalek, an Enfield Republican, floated the sunset solution in a June 7th Courant Op-Ed article that solicited varying opinions on how to resolve the impasse.

“Cutting programs and raising taxes is the only logical solution,” wrote Hanzalek who served in the House for 10 years. “Those draconian measures sound like political suicide. Perhaps that’s why the governor and legislators have been in denial.”

Hanzalek’s suggestion — increases with a “built-in statutory (and enforceable) sunset provision” — diffuses the main concern of conservatives that a tax hike will be a license to grow the size of state government. At the same time she argues the cuts could be time limited as well and over time functions and services could be restored to get the state over the hump of the worst economic downtown since the Depression.

Given the depth and severity of the recession sunsets might need to be in place for more than two years, extending into the 2012-2014 period.

If Gov. Rell and her advisors are at all in touch with fiscal reality they know that some combination of tax increases and cuts will be necessary to preserve “core services” the Governor wants to maintain. That has already been acknowledged by legislators in adopting their budget plan.

To solve this crisis both the Governor and the Legislature must “pick their poison” as one lawmaker put it during the budget debate. All the more reason they would do well to heed Hanzalek’s advice and turn to a sunset solution.