DAILY NEWS CLIP: January 22, 2025

Lamont says his budget plan will call for more tax cuts


Republican-American – Monday, January 20, 2025
By Paul Hughes

Gov. Ned Lamont plans to propose more tax cuts to follow up on the big tax relief package that he and state legislators passed two years ago.

Lamont confirmed to reporters last week that the two-year budget plan that he will present to the legislature on Feb. 5 will include tax cuts, but the two-term Democrat declined to provide any specifics.

He only offered a vague hint that the contours of the contemplated tax relief would not be along the lines of what he has already done. A day later, he clarified that he will target small businesses.

Lamont and the General Assembly passed one of the biggest tax relief packages in state history two years ago as part of a bipartisan two-year, $51.1 billion budget.

Democrats and Republicans delivered a historic $460 million reduction in state income taxes between the biggest rate cuts to date, an increase in the earned income tax credit, and the exemption of more retirement income. The first rate reductions in the state income tax since the mid-1990s accounted for most of the estimated tax savings. It was projected that 1 million tax filers will benefit from the rate cuts.

LAMONT DISCLOSED that he plans to propose additional tax cuts when he spoke to reporters following a speech last Wednesday to Connecticut Business & Industry Association’s annual economic summit.

One of the CBIA’s legislative priorities is a tax break for members of S corporations, partnerships and limited liability companies. Lamont had once shared this priority, but he rejected the idea last week.

In 2018, the state added a new component to the income tax, called the pass-through entity tax. It was intended to work around a new $10,000 cap on state and local tax deductions on federal income taxes imposed during President Donald Trump’s first term in 2017.

The business earnings of members of S corporations, partnerships and limited liability companies are taxed at the top personal income tax of 6.99%. An offsetting corporate or personal income tax credit can be claimed as a corresponding federal deduction, and eligible businesses are able to pass along the benefit of the deduction to their members.

The tax credit was cut from 93.01% to 87.5% in 2019 during Lamont’s first year in office, and the CBIA is urging Lamont and the legislature to restore the original credit.

Lamont told reporters last Wednesday that restoring that 2019 reduction is no longer a priority for him. Instead, he advised that state leaders should wait to see if Trump and the Congress fully restore the SALT deduction, or increase the cap.

The state has collected nearly $12 billion from this newest component of the income tax. More than 130,000 taxpayers are taking advantage of this filing option, according to DRS figures.

DEMOCRATS AND REPUBLICANS have introduced more than 40 bills and counting that proposed reductions to the income tax. The Finance, Revenue and Bonding Committee will determine what tax bills go forward.

Bills are proposing to add a child tax deduction or a child tax credit to the income tax, exempt overtime pay, tips and gratuities and more retirement income, deductions for volunteer firefighters and other emergency responders, long-term care insurance premiums and full-time home health costs, and credits for first-time home buyers, student loan borrowers, family caregivers and educators buying teaching supplies.

Senate President Martin M. Looney, D-New Haven, proposed a surcharge of 1.75% on capital gains for the top two income tax brackets. Sen. Ryan Fazio, R-Greenwich, proposed to tax the capital gains of certain endowment funds of institutions of higher education and dedicate the revenues to reducing the payroll deduction that participants in the Paid Family and Medical Leave Insurance Program are required to contribute.

Sen. Jeff Gordon, R-Woodstock, proposed to cap aggregate income tax collections and require prorated refunds to taxpayers when the limit is exceeded. The state collected nearly $12.9 billion in income taxes in the last fiscal year. Taxes on personal earnings are now projected to raise $14.6 billion in the first of the upcoming two-year budget cycle and $15.2 billion in the second year.

REPUBLICAN LEGISLATORS are once again proposing to eliminate the highway user tax.

The mileage tax on heavy trucks raised $45.4 million in the last fiscal year. The tax had been projected to raise $90 million annually to support the Special Transportation Fund. The highway user tax was enacted in 2021 after Lamont and supportive Democratic legislators failed to secure legislative approval for highway tolls and a carbon tax on large fuel suppliers.

Democratic and Republican legislators have proposed to eliminate the 1% surtax meals and prepared foods on top of the 6.35% sales tax. Rep. Bob Godfrey, D-Danbury, proposed to lower the sales tax rate from 6.35% to 6%. A bipartisan House bill proposes to exempt all aircraft weighing less than 6,000 pounds from the sales tax. Sen. MD Rahman, D-Manchester, proposed to exempt up to $2,500 of the cost of a headstone.

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