Tax Relief

As CT coffers swell, requires tax breaks get louder

The Connecticut State Capitol as seen from inside the Legislative Office Building.

Connecticut continues to run huge government budget surpluses and reduce debt even though the economy has not fully recovered from the coronavirus.

But even as the state coffers swell, most of Connecticut’s COVID-19 response has been paid for with federal aid, leading some political leaders to question Governor Ned Lamont’s approach to a new year of state elections in less than three months .

It is wonderful to amass record reserves and wipe billions of dollars in pension debt, they say. But with Connecticut still shedding 86,000 jobs since last spring’s worst pandemic, and with businesses on the hook with nearly $ 850 million in unemployment debt, should the state do more with its own piggy bank?

“I think Connecticut residents are much less interested in whether we have a balanced budget and what our household prospects are when they are unsafe in their homes when thousands are unemployed and gas prices are rising,” said Vincent J., the chairman of the House of Representatives Candelora, R-North Branford. “The government works for itself. It doesn’t work for the Connecticut people.”

“Our rain day fund is full, which is wonderful, and we have started paying off our pensions – which is wonderful and needs to be carried on,” said Candelora’s predecessor, Derby Republican Themis Klarides, who is weighing a gubernatorial offer for 2022. “But we need a holistic approach that will get Connecticut back on its feet.”

Tax breaks for working families back on the table

The Republicans, who stopped controlling the governor’s office since 2010 and even a state legislature since 1997, aren’t the only ones questioning the need for tax breaks.

Rep. Sean Scanlon, a Democrat from Guilford and co-chair of the Finance, Revenue and Bonds Committee, campaigned last spring for government relief for low and middle income households through the creation of a new child tax credit under the state income tax system.

Lamont, a Greenwich Democrat, blocked these efforts for two reasons: First, it might not be affordable in a few years if Connecticut’s economic recovery from the pandemic isn’t robust. Second, Congress temporarily extended the state child tax break for a year and started talking about making that improvement permanent.

But Connecticut has some of the most extreme income and wealth inequalities in the nation, and Scanlon and others counter that even a permanently improved federal loan – albeit helpful – cannot eradicate huge niches of poverty.

Senate President Pro Tem Martin M. Looney, D-New Haven, said if relief is offered when the general assembly convenes in February 2022, those helping troubled households have the best chance.

“I think we will look for ways to build more justice and progressiveness into our entire system,” he said.

And with the focus on Capitol Hill now apparently on extending state improvements for only a second year – and not indefinitely – Scanlon said it was time again for state officials to discuss state tax breaks for working families.

“I plan to spend a lot of time next year,” said Guilford lawmakers. “I think we have one [fiscal] Way for that. “

The finances of the state government are becoming more and more rosy

The “path” cited by Scanlon starts with a record-breaking Rainy Day fund of nearly $ 3.1 billion – that’s 15% of the state’s total General Fund – but it doesn’t end there.

State analysts say that the budget of 46.4 billion.

By late summer, the Lamont budget office had raised its surplus forecast for the first year to $ 1.25 billion and increased it to nearly $ 1.5 billion on Wednesday.

And now, impartial analysts predict that required annual payments to pension funds could decrease by about $ 200 million by 2024. This is largely because Lamont and lawmakers paid last fiscal year’s huge surplus, about $ 1.6 billion, into the pension system.

Those $ 200 million annual savings are huge as massive federal pandemic aid to Connecticut will expire in 2024.

Lamont and state lawmakers used nearly two-thirds of the $ 3 billion federal budget under the American Rescue Plan Act to balance the new biennial state budget. However, given that this biennial package is expected to close in more than $ 2 billion in surplus – and that surplus would flow into pension systems if not diverted – it could be argued that Connecticut is making most of its pandemic relief effective uses to reduce pension debt.

The Republicans say that the management of this pension problem is enormous, but also the stimulation of the economy. And Connecticut has enough money to do both.

“A budget surplus means that politicians have stolen more from taxpayers than they need,” said Madison Republican Bob Stefanowski, who lost the 2018 gubernatorial contest to Lamont and is considering running in 2022. Lamont has not yet said whether he will be re-elected next year.

“How about if you give some of it back to help the residents with out of control energy prices, higher food costs or to pay for a good education?” Stefanowski adds. “Or are you using some of the surplus to better fund law enforcement and keep residents safe?”

Companies looking for greater government support

Candelora urges state officials to reconsider an earlier unemployment fund bailout that could bring tremendous relief to businesses.

Connecticut will have borrowed around $ 1 billion by the end of 2021 to keep its unemployment fund solvent during the pandemic, state labor officials said. Corporations will be taxed with the restoration of that confidence.

Lamont and state lawmakers used $ 155 million in federal aid to cover 1/6 of that debt. But Candelora says the state should try to do more.

Chris DiPentima, president and CEO of the Connecticut Business and Industry Association, said looming debt is a huge deterrent to hiring, and while companies appreciate the $ 155 million support they still hope Lamont does and the legislature will cover more of the bill.

“The business world is trying harder than ever to recruit new employees,” DiPentima said, noting that Connecticut’s 6.8% unemployment rate remains the same highest in the region and 2 percentage points higher than the national value.

But Lamont labor commissioner Dante Bartolomeo said Connecticut has outperformed the region in job growth since just before the pandemic began, adding nearly 19,000 jobs from July to September this year.

“For us, the most important thing is that Connecticut creates jobs,” she said. “We believe our economic recovery is strong and it is showing.”

The construction industry, which remained largely open during the pandemic, has fully recovered, added Bartolomeo.

Lamont has not ruled out any tax cut proposals at the moment, said Max Reiss, the governor’s communications director, who added that the state’s economy has made far more progress than many are aware of since the worst of the pandemic.

The Back-To-Normal Index, a barometer of dozens of economic indicators compiled by Moody’s Analytics – the research arm of a major Wall Street rating agency – and CNN, ranked Connecticut since the 5th before the COVID-19- Outbreak in March 2020.

Reiss also said Connecticut’s unprecedented household safety net and its unprecedented additional contribution to the pension system should not be underestimated.

He found that governors and legislatures in the 1990s and 2000s often amassed billions in surpluses but spent the majority of those dollars without cutting taxes, building reserves, or reducing debt.

“Governor Lamont is always looking for tax breaks,” added Reiss. “If there are ways not to jeopardize the progress made … the governor looks for it.”

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