The Senate Democrats released a proposal Tuesday to use more than $200 million of the state’s surplus to stimulate the economy with tax relief for low and moderate income families and some small businesses. GOP lawmakers weren’t too critical of the package saying later in the evening that they too are working on ideas to stimulate the state’s economy.
Senate President Donald Williams said Tuesday afternoon that his caucus is proposing a one-time property tax credit of $250 to $750 for homeowners jointly making less than $190,500 and an Earned Income Tax Credit for low-income families making up to $38,000.
The income sensitive property tax credit would come in the form of a check and it would be mailed out to homeowners based on their 2006 tax returns, according to Derek Slap, spokesman for the Senate Democrats. Republican lawmakers said they see a few problems with this because what happens if someone no longer lives in the state, but qualified for the credit in 2006.
However, GOP lawmakers weren’t too critical of the idea of it because it was clear the proposal was still in its infancy and they didn’t necessarily disagree with Democrats regarding the use of tax credits to stimulate the economy.
Williams said he would like to get the check out by the end of February, but acknowledged that’s ambitious since budget adjustments usually don’t get finalized by the General Assembly until the end of the legislative session. But yet, as part of the majority party, he was still optimistic it could get done.
Gov. M. Jodi Rell and most Republicans oppose a state Earned Income Tax Credit, which has been proposed by Democratic legislators for several years.
Unlike the progressive income tax debate Democrats lost last year when they couldn’t find enough votes to override the governor’s veto, Williams said he is taking an approach “much more similar to the approach we took when we passed the crime bill.” He said Democrats are working in a bipartisan manner to get the governor and the Republicans to consider these proposals.
The other proposals include a revolving $50 million mortgage relief program that would help fewer than 300 of the 21,000 homeowners stuck with adjustable rate mortgages, elimination of the $250 business entity tax, and $10 million in energy assistance.
Williams said the $50 for mortgage relief would come from bond funds and would be a revolving program. Senate Minority Leader John McKinney said at the Governor’s residence Tuesday afternoon lawmakers on both sides of the aisle were told the New England Governor’s Association was working with three national banks to set up a revolving loan program to help mitigate the subprime situation in the Northeast. “The subprime situation is going to have to be solved by the private market,” McKinney said Tuesday evening.
McKinney, who in general supports an Earned Income Tax Credit, said he was unaware residents in the state who qualify for the federal EITC were leaving $66 million on the table. He said he’s all in favor of changing the state’s tax structure, but would first like everyone who qualifies for the federal credit receiving it. House Minority Leader Lawrence Cafero suggested maybe some of the money should be spent on outreach.
He said the elimination of the business entity tax which brings in $30 million in revenue to the state every year would only be applied to small “mom and pop” businesses. He said he’s not proposing losing the entire $30 million in revenue, but did not have exact numbers as to what it might cost. Cafero said the Democrats “couldn’t agree with us more,” regarding the business entity tax.
Cafero said the House Republicans would be unveiling their plan to stimulate the economy Wednesday at 1 p.m. While he refused to unveil any details of the proposal he did say he approved of the Democrats approach regarding tax credits rather than tax rebate. He said any time you use surplus money you want to be looking at tax credits which don’t fall under the statutory spending cap.