EAST HARTFORD, CT — Democratic gubernatorial candidate Ned Lamont was on the campaign trail again Wednesday calling out Republican President Donald Trump for limiting the state and local tax deduction to $10,000.
As part of the federal tax overhaul, Republicans in 2017 capped what’s commonly referred to as the SALT deduction, a move that’s been widely seen as punishing “blue states” controlled by Democrats where taxes are often higher.
Taxpayers won’t be writing a check to the federal government until next year, but Lamont used about a half-hour Wednesday to call attention to it.
According to the Office of Legislative Research, in 2015, the most recent year for which data is available, 41.3 percent of federal tax returns filed in Connecticut claimed the SALT deduction. The average amount of the deduction was $19,665 per return.
Of the 1.7 million taxpayers filing a tax return, 726,560 claimed the SALT deduction. Those filings represent $10 billion in deductions that otherwise would have been claimed, if they had not been capped.
“What I particularly don’t like about this is that is doubles down on the fact that Connecticut is already a donor state,” Lamont said. “We’re already sending billions more to Washington D.C. than we get back. We’re subsidizing all these other states that don’t invest in their infrastructure the way we do.”
Lamont said the Trump tax reform reminds him a little bit of the “Stefanowski elimination of the state income tax.” He said the Trump tax bill creates “deficits as far as the eye can see and the Stefanowski tax bill can have similar effects although we cannot borrow in this state. We have to pay our bills.”
He said as governor he will be fighting alongside U.S. Rep. John B. Larson, who sits on the Ways and Means Committee, and Rep. William Tong who is running for attorney general, to make sure Connecticut gets its fair share.
“Republicans talk about states’ rights until it’s not convenient,” Tong said. “Under the 10th Amendment it is the right of Connecticut to pass tax laws that make sense for us.”
Tong’s Republican opponent, Susan Hatfield, said she bets Tong wished he hadn’t voted for two of the largest tax increases in history.
“I’m sure he wishes he hadn’t followed Gov. Malloy over the cliff by supporting two historic income tax increases that have crushed the Middle Class, driven residents and businesses away, and kept Connecticut’s economy in ruins,” Hatfield said.
At the same time, she didn’t dismiss the idea of challenging the federal government over the issue.
“The issue of finding a sensible solution to recent federal tax reform should be done with both cooperation and a focus on a solution to make sure Connecticut taxpayers are not harmed by these limits on tax deductibility,” Hatfield added.
Connecticut is one of three states that have sued the IRS over the SALT deduction cap.
Earlier this year, Connecticut lawmakers tried to limit the impact of the new law by passing legislation that allowed municipalities to form charitable organizations that would keep the payments tax deductible. However, U.S. Treasury Secretary Steven Mnuchin squashed that attempt last week when the IRS released a new rule saying that wouldn’t pass muster.
In a statement, Mnuchin said the new rule would prevent attempts to “convert tax payments into charitable contributions.”
The Connecticut legislation that created a new pass-through entity tax — and an additional tax credit — to help offset the impact of the federal law on pass-through entities and allowed municipalities to provide a property tax credit to eligible taxpayers passed with bipartisan support.
Republican Bob Stefanowski’s campaign didn’t dismiss the states effort to challenge the federal government.
“We support any effort to give the hard-working people of Connecticut tax relief,” Kendall Marr, a spokesman for Stefanowski, said. “Ned concentrating on state and local deductions ignores the root of the problem, which is that he and Dan Malloy have supported tax increase after tax increase.”
Lamont, who ran against Gov. Dannel P. Malloy in 2010 and didn’t speak to him for nearly seven years, hasn’t ruled out raising taxes to balance the budget and has proposed trucker-only tolls to raise revenue, but he hasn’t proposed or supported any tax increase. He has proposed increasing the property tax credit, which has decreased over the years from $500 down to $200 for middle class homeowners.
In 2014, Gov. Dannel P. Malloy campaigned for a second term on a promise that he wouldn’t raise taxes, but when the budget situation deteriorated he went back on a campaign promise and increased taxes.