Connecticut Budget Approved With Numerous Tax Increases

May 5, 2011

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 tax 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 inflation-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 tax 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 taxes 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 tax 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 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.

More on Connecticut here.

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