HARTFORD, CT — The Finance, Revenue, and Bonding Committee filed a handful of bills Wednesday, including one that would eliminate the estate tax and also borrow $200 million for STEM scholarships.
The 88-page document would implement the recommendations of the Commission on Fiscal Stability and Economic Growth and is similar to Gov. Ned Lamont’s revenue package, which introduces sales taxes on goods and services that were previously exempt.
At first glance, the bill seeks to reduce some of the sales tax increases pitched by Lamont, but there’s no fiscal note yet so it’s difficult to tell.
Rep. Jason Rojas, D-East Hartford, who chairs the Finance, Revenue, and Bonding Committee, said the bill was requested by Rep. Chris Davis, R-East Windsor, the ranking Republican on the committee.
Davis said out of respect for the privately funded work of the Commission on Fiscal Stability and Economic Growth he put forward legislation calling for some of the recommendations they made in their report.
“I am not 100 percent supportive of their recommendations,” Davis said. “But their ideas should get a hearing.”
Davis said he could only put forward some of the commissions revenue and bonding recommendations and not their budget cuts or pension reforms because those issues fall under the cognizance of other committees.
Republican Party Chairman JR Romano was quick to criticize the bill on Twitter when he thought it was a Democratic proposal.
“The majority of the taxes @CTDems & @GovNedLamont are proposing this session will hurt the working class the most. At the rate their money is being diverted out of their paychecks, they may never even encounter the estate tax because they’ll be left with nothing,” Romano tweeted.
The biggest difference between the committee bill and Lamont’s budget is the estate tax. Lamont’s budget maintained the estate tax and delayed reporting to nine months after a death, rather than the current delay of six months. But Davis’ committee bill would phase out the tax entirely.
The move will not be popular among members of the Progressive Caucus, who have already said they have no desire to eliminate the estate tax, especially if the state doesn’t increase income taxes on Connecticut’s wealthiest residents.
Over the past two years the estate tax has brought in about $218 million to $223 million per year. The tax only applies to estates larger than $3.6 million.
If Connecticut gets rid of the estate tax, “it’s going to be a huge transfer of wealth directly to the ultra-wealthy in our state,” Rep. Joshua Elliott, D-Hamden, has said.
He said it’s the millionaire with the suitcase myth, and Connecticut lawmakers should not listen to “anecdotal evidence” from wealthy people who leave Connecticut.
There’s also another problem created by the elimination of the estate tax for anyone who died after Jan. 1, 2019 — how to pay for the probate court system, which is entirely funded by the estate and gift taxes and fees. And since Lamont also proposed eliminating the gift tax, probate officials are raising the alarm.
Probate Court Administrator Paul Knierim told the Finance, Revenue, and Bonding Committee earlier this month that unless it finds other money in the operating budget, the changes that Lamont proposed “will cause the Probate Court system to be insolvent and unable to pay its bills in FY20.”
While most Republicans support eliminating the estate tax, it will be difficult to win their support on any sort of budget package that raises taxes. Before the bipartisan budget compromise of 2017, the last time a Republican voted for a budget was 2007.
The committee bill also includes other smaller changes.
For example, the bill keeps the hotel tax at 15 percent, instead of increasing it to 17 percent. It also keeps the rate for bed and breakfasts at 11 percent, instead of the 13 percent proposed by Lamont. Both bills transfer 10 percent to the state Tourism Fund.
The committee bill also adds a 6.35 percent sales tax to campground reservations just like Lamont’s budget proposal, and restores the boat tax to 2.99 percent. Lamont’s bill would raise it to 6.35 percent.
Kathleen Burns, executive director of the Connecticut Marine Trades Association, told the Finance, Revenue and Bonding Committee last month that boat sales have increased since the tax was reduced.
Burns said marinas have reported a 13-percent increase in slip rentals for the upcoming season.
The number of boats registered in Connecticut has been dropping for more than a decade. They were down 15.7 percent from 2007 to 2017, according to state records.
The Connecticut Marine Trades Association are hoping to keep taxes low to encourage registration.
Neither the committee bill nor Lamont’s proposal seeks to increase personal income taxes.
The committee has until May 2 to forward bills to the House.
Rojas said they are working to come up with a finance package that meets the spending plan put forward by the Appropriations Committee.
STEM Scholarship Program
According to the committee bill, the state would borrow $200 million to be used by the Office of Higher Education to develop a STEM (science, technology, engineering and math) Scholarship Program, “provided no portion of such proceeds shall be used for administrative expenses.”
Starting July 1, 2020, the Office of Higher Education would award scholarships of up to $5,000 a year for up to 4,000 Connecticut residents in the first year and up to 4,000 additional state residents in each of the next three years, “who are enrolled (1) as full-time or part-time undergraduate students at a public or an independent institution of higher education in the state and are seeking a degree in a field related to science, technology, engineering, mathematics or a health profession, or (2) in a teacher preparation program, as defined in section 10-10a of the general statutes, and whose subject area major is in science, technology, engineering or mathematics.”