Commission Suggests Lowering Some Taxes, Raising Others

HARTFORD, CT — The state Commission on Fiscal Stability and Economic Growth has recommended a number of tax and other changes in order to grow the state’s economy.

The commission suggested a revenue-neutral method for shifting taxes that would involve reducing income taxes, raises some business taxes, raising the state sales tax and reducing certain tax reductions and exemptions.

Under the plan a single filer earning $60,000 annually would see a $530 drop in income taxes and pay $110 more in sales tax.

Gov. Dannel Malloy thanked the commission members for their hard work to take a critical look at Connecticut's practices.

"The fact is, this commission’s report presents Connecticut with an opportune moment to engage in a meaningful conversation about bold ideas for growing our economy and building stronger communities where people want to live and work – now and into the future," he said.

The argument was also made to increase the minimum wage to $15 per hour by 2022.

Connecticut’s economy has been shrinking and is smaller than what it was in 2004, while neighboring states are seeing economic expansion. The Beacon Hill Institute found that Connecticut went from being the 8th most competitive state for doing business in 2001 to 43rd in 2016.

Connecticut’s problems are compounded as households that are migrating to Connecticut earn $30,000 less than those leaving the state.

Although the state is located between New York City and Boston it doesn’t take advantage.
“Connecticut does not leverage this advantage because partial rail service is not rapid enough to commute to Manhattan from outside of Fairfield County and the highways are too congested for regular commutes to either New York or Boston,” the commission said in its report.

Taxes

The commission argued to drop the income tax by 18 percent for the top bracket and similar or greater amounts in lower brackets. In exchange the sales tax would go from 6.35 percent to 7.25 percent.

Connecticut’s sale tax is lower than the U.S. average while its corporate and personal income tax is higher than average. Property and estate taxes are also higher than average.

Estate and gift taxes would be eliminated. Municipalities would have the authority to levy a .5 percent sales tax under the proposal.

For businesses a tiered payroll tax would have the largest companies paying a .8 percent tax, but the first nine employees wouldn’t count and a credit would cover half the tax for the next 10 through 99 employees.

The commission also urged the legislature to pass a 7-cent gas tax increase over a period of years.

Cost Control

Commission members argued to allow the legislature to set retiree and health benefit formulas for state employees when the current SEBAC contract expires in 2027. It is currently done through collective bargaining, which is an uncommon practice across states.

The commission also suggested coming up with $1 billion in cost reductions annually through the executive branch.

Another proposal involves combining the legislative committees that deal with spending and revenue into one. The commission noted that available revenue should determine spending, but the two committees don’t meet together or work from a common script.

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