On his 100th day in office on Thursday and after 17 town hall meetings, Gov. Dannel P. Malloy announced that he will modify ever-so-slightly his proposal to eliminate the $500 property tax credit on middle income earners, reducing it instead to $300.
The move admittedly comes at some expense and creates a $123 million gap in his proposed $1.5 billion tax package.
“I think this is a move that we can make that does not change the framework of the budget,” Malloy said. “It does not ask too much of anyone, and with respect to some members of our middle class, gives them a little more relief than the original plan I put out.”
In order to make up for some of the revenue lost by reducing, rather than eliminating, the property tax credit, Malloy will speed up the phase-out of the lower tax rates on higher income earners. This means couples and families making more than $600,000 a year will be taxed at 6 percent on most of their income instead of lower rates for the first portion of their income.
The phase-out of the 3 percent tax rate would start at $100,500 for joint filers and $56,500 for individuals. The phase out of the 5 percent, 5.5 percent, and 5.75 percent rate begins at $400,000 for joint filers and $200,000 for individuals.
Click here for the worksheet explaining the changes.
Malloy refused to increase his top tax rate of 6.7 percent for the wealthiest residents. He maintained his desire to keep a competitive advantage over surrounding states like New York, New Jersey, and Massachusetts.
Reinstatement of the property tax credit means couples and families making $60,000 a year will see their taxes go from $2,870 under Malloy’s first budget to $2,600, because the $270 property tax credit will offset their tax burden.
Ben Barnes, Malloy’s budget director, admitted these changes don’t add up to the full amount of taxes Malloy initially proposed and creates a $123 million gap that they will have to find a way to close. He said they’re currently working on that with the legislature’s budget writing committees.
Malloy admitted that through budget negotiations with the legislature there likely will be other changes to his tax package, including another look at the manufacturing machinery and equipment tax credit to municipalities. Municipalities have said the payment they receive from the state impacts some communities more than others and they would like to see a phase out of the revenue, rather than an elimination. Malloy said those discussions are ongoing and the only change he was ready to announce Thursday was the change to the property tax credit.
“This is the issue I wanted to be heard on as a result of doing those town hall meetings,” Malloy said. “This is an important change that I am throwing my efforts behind.”
Republican lawmakers like House Minority Leader Lawrence Cafero, R-Norwalk, were quick to jump to the microphone to criticize the governor’s posturing.
“If you think about where he’s shifting a little bit it’s the exact criticism that the majority Democrats had levied or had concerns with when he first introduced the budget,” Cafero said. “The changes you saw today are not as a result of the listening tour, because the listening tour said cut spending and there’s no spending cut. This is a result of negotiations with the Democratic legislature.”
Cafero and Senate Minority Leader John McKinney, R-Fairfield, have been complaining that budget negotiations are taking place without them when Malloy had initially said they would have a seat at the table. But they said it’s hard to negotiate with Malloy and his administration when they refuse to budge from their framework. McKinney and Cafero complained that they can’t offer suggestions to cut spending in exchange for tax increases because those ideas won’t even be considered.
Roy Occhiogrosso, Malloy’s senior communications adviser, said if Republicans come forward with “spending cuts that are real, that do not shred the safety net, and that do not force the governor to compromise on his basic principles, of course he’ll take a look at them.”
He said Republicans haven’t come forward with any of those yet.
“I have not said ‘no’ to one thing Republican leadership has asked me for,” Malloy said. Asked what they asked for, Malloy replied: “Nothing.”
Republicans said that’s absolutely not true. They said their requests have fallen on deaf ears, and instead they will be presenting their own alternative budget as they did under former Republican Gov. M. Jodi Rell. In the past, Republicans have complained that they’ve been left out of negotiations between Republican governors and Democratic leadership.