HARTFORD, CT — Four days after announcing a deal with Gov. Ned Lamont, the Democratic majority released a two-year, $43.35-billion budget that will increase sales taxes on certain items, institute a mansion tax on homes valued at more than $2.5 million, and reduce tax credits for small businesses.
The 567-page budget document was released online Sunday afternoon. Under new legislative rules, an “emergency certified” bill must be available for members to read 24 hours in advance of a vote, which is anticipated to be scheduled Monday.
The Finance, Revenue and Bonding Committee is expected to adopt the revenue estimates at 9:30 a.m. Monday.
Senate Democrats touted the budget deal as a step forward for Connecticut.
In a press release, they said the budget “dedicates millions in new job training initiatives, increases funding for local education, and creates a new universal debt-free community college plan.”
The debt-free community college proposal won’t go into effect until the second year of the budget and requires students to accept all available financial aid. Nearly 60 percent of community-college students already have their tuition, fees and book costs covered by federal funding, or they receive financial aid covering their tuition and fees. The budget initiative seeks to close the gap if the Board of Regents can find the money in their budget.
“Connecticut will dedicate millions in funding for job training programs in critical sectors of the economy like manufacturing and health care,” Senate President Martin Looney, D-New Haven, said. “In addition, this budget establishes debt-free community college which will create a ladder of opportunity for hard-working families to gain the skills required of a 21st century workforce.”
Senate Republican Leader Len Fasano, R-North Haven, said members need to read the document carefully before voting.
“This is more than just a two year budget. It creates brand new public policies with no transparency and no input from the public,” Fasano said.
“Instead of cutting government spending, the Democrat budget reduces promised funding for those most in need,” he added. “The budget removes cost of living increases for aid to the disabled (cutting $1.5 million), temporary family assistance for neediest families with children (cutting $4.2 million), SAGA which supports individuals who are unable to work for medical reasons (cutting $1.1 million), aid to the blind (cutting $9,100), and Old Age Assistance funds which go to the aged, blind or disabled (cutting $680,000). The budget also removes statutory rate increases for Old Age Assistance (cutting $2.5 million), Aid to the Blind (cutting $30,000) and Aid to the Disabled (cutting $2.8 million). Instead of reducing the size of government, Democrats are funding their new programs and pet projects by balancing the budget on the backs of the most vulnerable in our state.”
House Majority Leader Matt Ritter, D-Hartford, has maintained there will be widespread support for the budget even among its most progressive members. As written, it does not include a 2% surcharge on capital gains, which had been sought by that wing of the Democratic caucus.
In order to win the support of those members, Democrats decided one year after implementing the pass-through entity tax and corresponding credit to now reduce the credit from 93.5 percent to 87.5 percent. The result will be $50 million more in revenue to the state.
The business community complains this change in policy will impact small-business owners and not the wealthy that Democrats were intending to target.
Andrew Markowski, state director of NFIB, an association of small business in Connecticut, said “Most small business owners are middle-income earners, and the vast majority of their businesses happen to be structured as pass-throughs. So, any increase in this tax impacts them in a very negative way because they make plans based on their predicted costs.”
Office of Policy and Management Secretary Melissa McCaw said last week that these pass-through entities are still better off than they were if Connecticut hadn’t allowed for this pass-through entity tax and credit.
“Small businesses were targeted by the legislature this year in an unprecedented way,” Eric Gjede, vice president of government affairs for the Connecticut Business and Industry Association, said Sunday. “With the addition of so many costly labor mandates and tax increases, we are incredibly concerned about the job losses and economic impact that will be realized in the coming months.”
House Speaker Joe Aresimowicz, D-Berlin, said Saturday that people making more money through that system will also be paying more.
He contends the move is balanced considering the “pass-through entities have received a very, very large tax break from the Trump administration and what we’re reclaiming or asking them to contribute or requiring them to contribute to the state of Connecticut is a very small portion.”
The mansion tax would be an additional 1 percent conveyance tax on homes $2.5 million and up. However, it only applies to people who sell their home and leave Connecticut. If the person selling the mansion stays in Connecticut for three years after the sale they will receive the money back as credit on their income taxes.
The tax is expected to raise about $5 million a year.
Ritter described the tax Saturday as “really good public policy.”
The budget adds a sales tax to digital downloads, dry cleaning, and interior design services.
It increases the sales tax by 1% on meals and drinks sold by “an eating establishment, caterer or grocery store.”
The budget also allows the Connecticut Lottery Corporation to study an I-Lottery, which would allow the lottery in the future to offer its existing lottery draw games online through the corporation’s internet web site, online service or mobile application.
After much back-and-forth this weekend, the opioid tax, which pharmaceutical distributors warned raises constitutional questions, was eliminated from the budget.
However, the budget does increase the cost of trade-in vehicles. The fee auto dealers pay to take a trade-in will increase from $35 per vehicle to $100 per vehicle.
Jim Fleming, president of the Connecticut Auto Retailers Association, said the proposal never had a public hearing.
“To have this show up in the final days of session is not how the process should work. We are strongly opposed to this last minute change,” Fleming said.