New Tax Hikes, Spending Cuts Proposed By Malloy

HARTFORD, CT — Gov. Dannel Malloy provided legislators with an unsavory menu of potential tax increases and spending cuts to help balance the current year’s $208 million state budget deficit.

Malloy’s budget office provided legislators with up to $303 million in tax increases and spending cuts. Under state law Malloy must offer a deficit mitigation plan when the projected deficit is more than one percent of the state’s expenditures.

“I understand that these options will be almost universally objectionable, and that there is little appetite among you or your members for making such adjustments to your budget,” Governor Malloy wrote. “In fact, I agree these changes are difficult and that in better economic times, with a balanced budget, none of us would put them on the table for consideration.”

Malloy suggested it would take a mix of tax increases and spending cuts to close the budget gap. He warned legislative leaders that balancing the budget through vague means such as reducing overtime or agency spending might produce savings without apparent harm, but that agencies have already been cut drastically and any further cuts would result in deteriorating customer service.

Potential Tax Increases
A proposal to raise the sales tax to 6.5 percent would increase revenue by more than $33.4 million in the current fiscal year. Raising it to 6.9 percent would bring in $81 million.
Another proposed tax increase would be to raise the hotel tax to 17 percent from 15 percent and the restaurant tax from 6.5 percent to seven percent.

Other potential tax increases include increasing the tax on a pack of cigarettes by 25 cents and imposing a 75 percent excise tax on e-cigarettes.

Increasing the real estate conveyance tax from .75 to one percent (for transactions $800,000 or less) and from 1.25 percent to two percent for deals worth more than $800,000.
Malloy is also proposing eliminating the minimum bottle pricing on alcohol, which would bring in an estimated $300,000 for the current fiscal year. He is also putting the option of allowing grocery stores to sell wine on the table.

Potential Spending Cuts
Malloy has offered to reduce grants for substance abuse and mental health by $1 million and nearly $2 million respectively. Eliminating Medicaid payments for Graduate Medical Education would result in a $5.2 million savings.

Closing intake to Care4Kids would save $18 million. The program helps moderate income families pay for child care services.

Malloy is also suggesting that reducing municipal aid by $50 million could help close the budget gap.

The entire menu of potential cuts and increases can be viewed here.

Image via Susan Haigh/AP