Gov. Dannel P. Malloy’s budget has already gone to the printer and the portions he’s released to the media have been exclusively focused on spending cuts and consolidations, but a coalition of labor unions and progressive advocacy groups offered their suggestions Thursday on where the state can find some additional revenue.
Formed two years ago, the Better Choices for Connecticut coalition, again focused on increasing the states income tax on wealthier residents as one of the solution’s to the state’s budget woes.
Under their proposal, which isn’t much different than last year’s proposal, the state’s income tax would begin to increase for couples making $150,000 a year by increasing the rate from 5 to 5.5 percent. Couples making $500,000 would see their rate increase from 5 percent to 7 percent and the highest rate would be 8.95 percent for couples making $2 million or more.
Maggie Adair, a member of the coalition and policy director for the Connecticut Association for Human Services, said nearly all taxpayers with incomes less than $120,00 would experience no change in their tax rate.
“Only 15 percent of Connecticut’s residents would experience any income tax increases,” Adair said. The bulk of taxpayers would see their income tax go up $200 a year. The coalition estimated their more progressive income tax structure would raise about $1.5 billion.
“We wanted to broaden the discussion on revenues since most of the discussion has been centered on spending,” Joachim Hero, a researcher for Connecticut Voices for Children, said.
It’s a conversation Malloy entertained often on the campaign trail, but unlike his counterpart Gov. Andrew Cuomo in New York, Malloy didn’t make any pledges regarding tax increases. However, he has always maintained that Connecticut needs to keep its competitive advantage with neighboring states.
“I want to be very clear that in all income-tax brackets we need to maintain a competitive advantage with New York, New Jersey and Massachusetts,” Malloy said back in October. “I will not give away that advantage.”
In a paper released earlier this week Tom Foley, Malloy’s Republican opponent, argues that Connecticut’s wealthy citizens have the resources to pick up and move and will if the state decides to increase the income tax one percentage point.
The paper estimates that raising the income tax one percentage point would reduce the size of this tax base by ten percent over ten years, resulting in negative revenue generation of $13 million in year ten, $2 billion less in state GDP, and 15,000 fewer jobs.
According to the coalition its income tax proposal keeps the rates across all income brackets lower than those of New York, Massachusetts, and New Jersey.
But the income tax isn’t the only tax the coalition would like to see increased.
Coalition members said they would like to see the state consider a several others changes to the state’s tax policy including the cancellation of up to $1.6 billion in sales tax exemptions, cancellation of more than $70 million in business tax exemptions, an increase in the one of the two gasoline taxes that was cancelled two years ago, a windfall profits tax on electricity generators, and restoration of the $50 million reduction on estate taxes.
The coalition says the alternative to these tax increases will be cuts in public services and programs.
Malloy has already said he’s looking to cut close to $2 billion in spending, which means he will need approximately $1.7 billion in taxes to balance his first budget.