Democratic legislative leaders and Gov. Dannel P. Malloy announced Sunday around 1:20 a.m. that they had reached a deal on the state budget, but they didn’t release any numbers.
House Democrats received information about the spending side of the budget Saturday afternoon and information about the tax package after midnight. None of what they were told was written down on paper, but lawmakers involved in those negotiations offered some details before heading home to sleep.
Rep. Jeffrey Berger, co-chairman of the Finance Committee, said the sales tax will remain at 6.35 percent and a half a percent will go to municipalities to help lower the property tax burden and a half a percent will help fund Malloy’s long-term transportation initiative.
Berger said the unpopular expansion of the sales tax on services such as accounting, engineering, advertising, and dry cleaning was removed from the budget.
“All of it’s gone. The only thing that’s in there are some exemptions that are eliminated,” Berger said.
The tax package also will triple a tax on computer and data processing from 1 percent to 3 percent, Berger said.
The budget also will increase the income tax on Connecticut’s wealthiest citizens, who make more than $1 million, raising it from 6.7 percent to 6.99 percent, Berger said.
Most of Senate President Martin Looney’s proposal is included in the package as well. Looney’s plan would restructure how the state taxes motor vehicles and also recalculate the way PILOT grant money is distributed to municipalities. That means the state will implement an average mill rate and use the half a percent of the sales tax to make towns with a higher mill rate whole, according to sources.
“This budget meets the state’s obligations and provides historic property tax relief for the people of Connecticut,” Looney said in a statement. “After years of acknowledging the need to change our Payment in Lieu of Taxes program, this year, we delivered revolutionary changes by taking into account the relative need for assistance based on the percentage of tax exempt property in each municipality. We also begin to provide substantial relief for car owners and high mill rate municipalities on their car tax.”
The budget deal also will limit the amount of losses a corporation can carry forward when computing the amount of tax it owes the state. It will reduce the amount of losses a company can carry forward by 50 percent.
Joe Brennan, president and CEO of the Connecticut Business and Industry Association, said his members have been very vocal about their opposition to the loss of the carry forward because it would hinder their ability to develop new products. He said in manufacturing it takes a long time to develop a product and during that time companies often face a loss that they could write off in the future once they begin to make a profit.
“This is only going to set Connecticut backwards,” he said. “It’s going to make the Connecticut economy much less competitive.”
In a joint statement, Malloy said the budget deal will help change Connecticut.
“This agreement will help Connecticut now and in the long-run — it helps transform our transportation infrastructure as we aim for a best-in-class system,” Malloy said.
But the deal, which has not been inked yet, could easily crumble before a vote on Monday.
The last election narrowed the Democratic majority in both chambers. All it would take to defeat the budget deal is 16 defecting Democrats — 12 representatives and four senators — to vote with a unanimous blocks of Republicans in both chambers against the budget.
House Speaker Brendan Sharkey, who blew past reporters on his way out of the building Sunday morning, said in a statement that they had listened to the concerns of their members.
“The legislature worked closely with the governor to finalize a budget that represents the wide ranging priorities of our diverse state, and sets us on a path that encourages continued economic growth,” Sharkey said. “Concerns over some provisions in earlier versions of the budget were heard and reflected in the final deliberations.”
Among the specifics not yet revealed about the budget deal, it was still unclear early Sunday whether the proposed changes to the spending cap were to be included.