Connecticut Democrats Reach Deal on State Budget, Tax Cuts

Connecticut Gov. Ned Lamont and his fellow Democrats in the General Assembly announced Wednesday they have reached a broad agreement on a revised one-year state budget proposal that includes nearly $500 million in tax reductions, including the continuation of the 25-cent-per-gallon gas tax cut until Dec. 1.

The $24.2 billion plan, slated to take effect in the midst of the election season on July 1, also includes substantial new spending for mental health programs for children and early childhood programs, which have struggled to pay workers competitive wages while ensuring services are affordable to families, lawmakers said.

The proposal also makes $2 billion in payments to help reduce state pension debt, according to the legislators, who have not yet released any documents.

Lamont and the Democrats have not yet settled how much of the state’s share of federal COVID-19 funds will be spent in this budget, including how much of that money will be set aside for pandemic pay for essential workers and to reduce the $493 million debt in the state’s unemployment trust fund. But they expressed confidence the budget will be approved before the legislative session ends on May 4.

“This is a really comprehensive budget,” said House Majority Leader Jason Rojas, D-East Hartford. “I don’t know why you would vote against a budget like this.”

Democrats said they were hopeful that at least some Republican legislators, the minority party in the General Assembly, will support the proposal.

While GOP leaders have expressed support for tax reductions, they’ve called for more immediate changes that will help families struggling with rising inflation. They’ve also called for larger tax cuts, suggesting Connecticut join Republican states and challenge limitations that the federal pandemic relief law imposed on states seeking to cut taxes.

“I think we need broad-based tax relief,” said House Minority Leader Vincent Candelora, R-North Branford, shortly before the Democrats’ announcement. “Just to give tax breaks to people only with children is short-sided. It’s everybody that’s suffering.”

Some of the tax changes legislators said are part in the Democrat agreement include the following:

PROPERTY TAXES

Lawmakers said the deal includes Lamont’s proposal to increase the local property tax credit against the personal income tax from $200 to $300 and expand eligibility, affecting an estimated 500,000 taxpayers. The credit, which has been scaled back and changed over the years, is currently limited to those over age 65 or with dependents.

Lamont’s plan would provide the tax credit to all adults within the current income limits — $109,500 for single filers and $130,500 for joint filers.

The plan also caps local property taxes on motor vehicles, affecting 75 municipalities. The bill would reimburse cities and towns for the lost revenue.

CHILD TAX CREDIT

The bill creates a new, one-year $250 child care tax credit, similar to the federal pandemic program that expired earlier this year. Rep. Sean Scanlon, D-Guilford, co-chair of the legislature’s Finance Revenue and Bonding Committee, said people who earn less than $100,000 and families that earn less than $200,000 would be eligible for up to $250 per child, up to three children.

Responding to GOP concerns that people might have to wait to benefit from these tax changes, Scanlon said lawmakers are hoping to make the child tax credit “more of a rebate” that families might receive as early as this summer.

RETIREMENT INCOME

Previously, Connecticut lawmakers exempted Social Security income from the state's personal income tax, and passed legislation that would entirely exempt pension, annuity and 401K income from taxes, in phases, by 2026. Under this proposal, Scanlon said, taxes would be phased out by fiscal year 2024.

GAS TAX

Noting the continued impact of inflation and the war in Ukraine on gas prices, legislators said the Democratic plan would continue to temporarily suspend Connecticut’s 25-cent-per-gallon excise tax until Dec. 1.

In March, state lawmakers had voted to suspend the tax from April 1 to June 30.

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