Governor Dannel Malloy (D-CT) signed his budget bill into law yesterday with 19-17 approval in the Connecticut Senate and 83-67 in the House.
To close a $3.3 billion deficit in the next fiscal year, the budget enacts spending cuts and the largest dollar-for-dollar taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increase in Connecticut history. The tax increase – $1.4 billion in the first year starting July 1 and $1.2 billion in the second – is the state’s biggest on an inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. -adjusted scale since former Gov. Lowell P. Weicker Jr. introduced the broad-based income tax in 1991.
The new budget looks pretty similar to Gov. Malloy’s initial proposal which Mark Robyn and I wrote about in a Fiscal Fact in early March. Sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. rates will rise to 6.35%, luxury goods will be taxed at 7%, sales and use tax will be expanded to goods that are currently untaxed such as pet grooming, yoga, and spa services, and alcohol and cigarette taxes will increase substantially. All of these increases will go into effect on July 1, 2011. Personal income taxes will increase starting January 1, 2012 (top bracket will be raised from 6.5% to 6.7%). Property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es and corporate taxes will also be subject to increases.
The most noteworthy changes from the initial budget plan to the present are the elimination of the proposed 3-cent gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. increase and the implementation of an “Amazon” tax. Gov. Malloy received virtually all of the tax increases he requested, but in order to balance out the Connecticut state budget $2 billion of concessions for state employees must still be agreed upon for the next 2 years ($1 billion per year). If an agreement isn’t met with public employees Malloy intends to layoff “in excess of 4,000.” According to TheDay.com in New London, CT:
The first layoff notices are ready to go out Friday. But he wouldn’t specify whether the 4,000-plus number is a grand total or represents just the notices to go out Friday.Share