HARTFORD, CT — Hoping to influence any last-minute decisions Democratic Gov. Ned Lamont may be making about next week’s budget proposal a group of labor leaders urged him to keep all revenue options on the table.
Lamont, a millionaire from Greenwich, promised not to increase personal income taxes on the campaign trail. Instead, he campaigned on a promise to increase the property tax credit for middle and lower income taxpayers.
Lamont will be tasked with closing a budget deficit of $1.5 billion in the first year, and $2.3 billion in the second year of a two-year budget proposal he will present to the legislature on Feb. 20.
On Monday, labor leaders were quick to point out that in 1991 former Gov. Lowell P. Weicker, who also lived in Greenwich and campaigned on balancing the budget without an income tax, ended up winning support for Connecticut’s first income tax.
Sal Luciano, president of the Connecticut AFL-CIO, said they are looking at shifting some of the income tax burden from the middle class to the wealthy.
“We’re asking the legislature to re-look at shifting some of that burden from working people to those who can most afford to pay taxes,” Luciano said.
He said they don’t have any certain percentage in mind for how much they would need to increase rates on top income earners, but it should be enough to shift some of the burden from the middle class.
He cited a tax incidence report that shows about 725,200 taxpayers with an average adjusted gross income $48,948 per year had a an overall tax rate of about 23.6 percent in 2011, and about 15,050 taxpayers with an adjusted gross income of between $600,000 to $2 million per year paid a tax rate of about 7.69 percent.
Mile Rapoport, Connecticut’s former secretary of state and a state lawmaker back in 1991, said lawmakers who said they weren’t voting for an income tax that year ended up voting for an income tax.
“Not because they said they would, but because it was the right thing to do,” he said.
Rapoport pointed out that they did it with a “wealthy millionaire from Greenwich” that year, too.
Rapoport, who is currently a senior practice fellow in American Democracy at Harvard’s Kennedy School, said what the governor and the legislature have to do is look at the whole tax system.
He said it’s been 28 years since the income tax was enacted and the state needs to look at who pays it and how might it be broadened. He said they also need to look at how the sales tax might be broadened.
“Everything ought to be on the table, not just how do we cut the budget and how do we extract more money from state employees,” Rapoport said.
Luciano agreed. He said lawmakers need to take a hard look at how much tax revenue the state is forgoing due to so-called “tax expenditures.”
According to last February’s report from the Office of Fiscal Analysis there are about $5.25 billion in tax expenditures, which are really exemptions, exclusions, or tax credits. It’s revenue the state could be collecting, but has decided not to collect for one reason or another.
“Diesel fuel for yachts, for instance, is not taxed,” Luciano said. “So there are things that we can look at through the spectrum. It’s everything that should be looked at for a courageous budget.”
The tax exemption on marine fuel that Luciano cites is only about $12 million in revenue per year. It was first exempted in 1992.
Lamont is also looking at broadening the sales tax base in ways that will impact everyone in Connecticut who downloads anything from the Internet.
In an open letter to Connecticut residents Monday, Lamont tried to make the case for paying a 6.35 percent sales tax on so-called digital downloads.
“If you go to a store to buy a DVD, you pay sales tax. But if you download that same DVD from a streaming service, you don’t. What sense does that make?” Lamont asked.
Currently, the tax is 1 percent, but Lamont seems to be preparing Connecticut residents for a tax increase on digital services.
At the same press conference, labor leaders like Luciano warned against cutting spending too much or asking for more concessions from labor unions.
“The state of Connecticut has pretty much balanced its budget by soaking the middle class,” Luciano said.