Alongside Democratic legislative leaders, Gov. Ned Lamont signed the $24 billion budget adjustment Monday that includes $600 million in tax relief.
That’s more than they anticipated they would be able to offer Connecticut residents this Election year because revenue came in higher than expected, but it still creates about an $800 million deficit in 2024.
“I thought about this as our first budget as we’re coming out of COVID,” Lamont said Monday during the capitol bill signing. “And what do we want to accomplish and what is the foundation we want to build upon.”
He said the investments in child care and children’s mental health were going to be helpful to get people back to work.
Lamont also said the budget also pays down a substantial portion of Connecticut’s unfunded pension liability. The budget enables the state to make an $3.5 billion payment on its unfunded pension debt.
“I’d like to give a shout out to Dan Malloy,” Lamont said. “First thing you do when you find yourself in a hole is stop digging. He stopped digging.”
He said it’s the “largest or one of the largest” tax cuts in the history of the state. “I really wanted this to be a middle class tax cut,” Lamont said.
The budget also includes a 25 cent gas tax cut, and continues to fund free bus service until December. It creates for one year a new $250 per-child tax credit for lower and middle earning families and expands for one year eligibility for the Earned Income Tax Credit, which boosts the tax returns of the state’s working poor.
More permanent tax breaks include a provision that caps the mill rate at 32.46 which will reduce the car taxes in 75 towns and reimburse municipalities for the lost revenue. The budget also expands eligibility for a property tax credit and increases it from $200 to $300. Another provision speeds up a plan to eliminate taxes on pensions and annuities.
The budget leaves much of its surplus unspent, ensuring the state can make a scheduled $3.58 billion contribution to its long unfunded $95 billion debt, including about $40 million in pension debt.
“I’m the first governor in four years that did not raise income taxes and did not raise the sales tax rates,” Lamont said. “I think that’s transformative.”
Republican lawmakers argued that Lamont should have cut even more in taxes, including the income and sales tax.
This weekend during the party convention, Republican gubernatorial candidate, Bob Stefanowski, has said decreasing taxes in an Election year doesn’t make up for the three budgets Lamont has signed to increase taxes since taking office in 2019.
“Billions and billions in debt with absolutely nothing to show for it,” Stefanowski said. “Connecticut has the second highest taxes in the entire country. We’ve got crumbling infrastructure that most states would be embarrassed of. Retired people on fixed incomes forced to leave Connecticut.”
On Monday he added: “Apparently, Governor Lamont thinks that he and Joe Biden taking $5,200 out of your left hand pocket and putting $400 back in your right hand pocket is a ‘historic’ tax cut. Frankly, it’s insulting to Connecticut’s working families, seniors, and small businesses.”
Republicans and Democrats alike have used the budget as a political document.
“I know people want a wedge issue, but I got a problem for you that you can’t solve,” House Speaker Matt Ritter said. “It won’t be the budget.”
He said he looks forward to talking about the budget for a long time to come.
“This is a budget that meets the moment,” Rep. Sean Scanlon, D-Guilford, said.
He said there are a lot of things going on in the economy at the moment that are out of the state government’s control right now.
“Whether it’s the price of gas or the cost of inflation, we, unlike many other states in this country, were in a position because of the fiscal turnaround that we have experienced to do something about that,” Scanlon said.
He said Connecticut is paying less on gas than almost every state in the nation and the one-time child tax credit means a family making under $100,000 a year with two kids will receive $500 by August.
He said the Republican plan would have required the state winning a lawsuit against the federal government that several red states have been trying to do since last year to no avail.
“We wanted tax cuts that were targeted to the families who needed it the most,” Lt. Gov. Susan Bysiewicz said. “That’s why we target the car tax and the property tax expansion.”
Scanlon said what they did was “actual real relief to people.”
“We actually did what we said we were going to do,” he added.
Republican lawmakers sought to frame it differently.
“This session, Connecticut lawmakers voted on the largest tax reduction in state history – but that’s not what Gov. Lamont is signing into law today,” House Minority Leader Vincent Candelora and Senate Republican Leader Kevin Kelly, said. “Connecticut Democrats voted against what would have been a record-breaking $1.2 billion tax relief package for Connecticut’s working- and middle-class families proposed by CT Republicans. We offered an income tax cut and sales tax cut and would have eliminated taxes that drive up the prices of food. We showed a better way to a more affordable Connecticut, but Democrats were unwilling to join us in delivering significant, immediate relief even as families struggle with historic inflation.”
Connecticut is using $1.4 billion in federal funding over the next three years to help them balance the budget.
“After raising taxes by over $6 billion in the last decade, CT Democrats are trying to sell $500 million in temporary relief in an election year as a panacea, so they can spend $2.3 billion now. This budget is a missed opportunity to make Connecticut more affordable, at a time when affordability is a real struggle for every working and middle-class family,” Candelora and Kelly, said.
