Connecticut’s current year budget deficit increased once again, rising another $66 million over the previous estimate and topping out at $96 million, according to a budget report for the Office of Fiscal Analysis. This marks a $216 million difference between the budget, which estimated a $120 million surplus, and the ...
Policy Corner: The Actual Cost of Gov. Lamont’s Tax Increases: $2.4 Billion Per Year
How big were the tax hikes in Governor Ned Lamont’s budget proposal? If you include all of the proposed increases over the next few years, and account for a few tax breaks, the total comes to $2.4 billion per year.
How did we get to that number, and why is it so much higher than what’s been reported?
First, we include projected toll revenue. We used Gov. Lamont’s numbers – he expects 60 percent of $800 million in toll revenue to come from Connecticut residents. While we think both numbers will likely be higher, we’ll give him the benefit of the doubt.
Some will say we shouldn’t include toll revenue in the tax increases this year since it won’t be collected until 2024 or 2025, but if tolls get through the legislature this year and the toll revenue starts to roll in, do you really think lawmakers in 2025 will want to take credit for the tax increase? No. Better to count it now, and hold the lawmakers who vote for it responsible for the increase.
Second, we include the tax increase proposed for the new paid Family and Medical Leave Act program, which Gov. Lamont included in his budget proposal. The 0.5 percent payroll tax is expected to collect $340 million. It’s a tax increase – it should be included in the numbers for this year.
Third, some reporters haven’t included canceled tax breaks, but we do. Here’s why: If you were expecting to pay less in taxes, and now you won’t, it sure feels like a tax hike. All the seniors who were advocating over the past couple of years to exclude more of social security from the income tax will find that Gov. Lamont has proposed to roll back their legislative win.
We recognize that coming up with a number for total tax increases in the budget is not an exact science – many of these numbers are moving targets – both for the years of Gov. Lamont’s proposed budget, and the years following. So, we’re being as transparent as possible.
Here’s how the numbers break down:
- $652 million in sales tax increases, which is projected to be up to $1.1 billion by 2022;
- $515 million increase in healthcare provider taxes, which are passed on to patients through higher insurance costs and payments for medical care;
- $480 million in toll revenue, 60 percent of $800 million in expected revenue by 2024;
- $340 million raised by a new 0.5 percent payroll tax to pay for paid FMLA;
- $163 million soda tax;
- $71.5 million property tax increase by 2022, to pay for teacher pension payments;
- $70 million income tax increase, mostly from canceled exemptions;
- $50 million corporate tax increase (average of two years), includes offset for elimination of the Business Entity Tax;
- $41.6 million in license and fee increases;
- $30.2 million plastic bag tax;
- $17.8 million in other miscellaneous tax increases, including on vaping, a real estate conveyance tax increase on homes over $800,000, and an increase in the movie ticket tax;
- -$9 million for the gift tax repeal.
TOTAL: $2.42 billion a year in proposed tax increases.
Budget figures are taken from the Office of Fiscal Analysis projections, found at https://www.cga.ct.gov/ofa/Documents/year/SYNG/2019SYNG-20190221_Synopsis%20of%20the%20Governor’s%20FY%2020%20and%20FY%2021%20Budget%20Plan.pdf
During his hour-long interview with WTIC 1080, Gov. Ned Lamont fielded questions from callers, one of whom questioned why the state diverted $170 million in vehicle sales tax from the Special Transportation Fund. The governor denied that funds had been diverted, labeling it a “myth.” “That’s a myth that gets ...