Senate and House Republicans called for more tax relief in light of increasing state tax revenues that have resulted in billions in surplus funds, but Democrat leaders said the state can’t offer more than $180 million in tax relief due to federal restrictions on COVID-relief funds.
Highlighting a balanced budget and ample reserve funds, Republicans argued that the state is collecting too much in the form of taxes and those funds should be returned in the form of tax relief.
“There is an over collection of sales and use tax, gross receipts tax that has over collected about a billion dollars from taxpayers’ wallets that was not anticipated,” Senate Republican Leader Kevin Kelly said during a press conference. “That’s due in large part because we have a 40-year high in inflation, a 40-year high that is now putting a crunch on every household across the state of Connecticut.”
Kelly said they were proposing “immediate, responsible relief” in the form of reducing the sales tax from 6.35 percent to 5.99 percent, eliminate the 1 percent tax on restaurant meals and the 25-cent gas tax through the end of the year, including diesel, and eliminate the highway use tax on trucks, and accelerate and eliminate the income tax on retirement payments.
House Republican Leader Vincent Candelora, R-North Branford, said they also want to reform Connecticut’s income tax brackets for individuals earning $75,000 per year and households earning $175,000 per year from 5 percent to 4 percent at an annual cost of $360 million and reduce the tax burden on those families by $750 per year.
“This is an opportunity for Connecticut make systemic change that will help the residents of Connecticut,” Candelora said.
Although Connecticut is experiencing budget surpluses, much of that surplus is balanced on the back of hefty federal funds that flowed into the state to aid in COVID relief. During a press conference, Democrat leaders said restrictions on the use of those funds mean Connecticut can’t cut taxes over $180 million.
“The reason we can’t cut taxes beyond $180 million, in our budget negotiations, is because the ARPA rules said we cannot,” House Speaker Matt Ritter, D-Hartford, said, adding they are also limited by Connecticut’s spending cap.
“It becomes a question of whether you can sustain exactly what it is,” House Majority Leader Jason Rojas, D-East Hartford, said. “If they’re banking it on inflationary growth in revenue, are you able to sustain that in the long term?”
Republicans want Connecticut join a number of other states, largely Republican-led states, in a lawsuit against the federal government over the ARPA restrictions. “Nowhere in the ARPA law does it say if a government over collects on its taxes we are mandated to continue to do so.”
Ritter, however, appeared skeptical, but said he would reach out to the Attorney General’s Office to have a conversation about the proposal. “But to pass a budget, to pass tax cuts, without some legal clarity seems like the height of irresponsibility,” Ritter said.
Republican leaders sent a letter to Attorney General William Tong asking that Connecticut join the challenge to the ARPA restrictions.
The Republican press conference came before the House is set to debate the $1.9 billion agreement between Gov. Ned Lamont’s Office and the State Employees Bargaining Agent Coalition that gives raises and bonuses to state employees.
“Our state government has taken advantage of these inflationary costs and we have a windfall of nearly a billion dollars this year coming into the state’s coffers,” Candelora said. “Government is working for itself, not the people of Connecticut.”