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Lamont should take clear stand in budget talks

When Gov. Ned Lamont released his biennial budget proposal back in February, he avoided any proposed increases in the income tax or other broad-based tax hikes. The approach was greeted with wide support, including in this editorial space.

Now the Appropriations Committee, co-chaired by 19th District state Sen. Cathy Osten, D-Sprague, has sent to the General Assembly a spending plan that lines up closely with what the governor proposed, albeit with different priorities — about $22.6 billion for fiscal-year 2022 that begins July 1 and $23.5 billion for fiscal-year 2023, boosting spend about 2% the first year, 3.5% the second.

The Appropriations’ proposal would give $50 million from the existing budget surplus to agencies that the state contracts with to provide health and human services. That would help offset the losses these nonprofit agencies suffered during the pandemic. And it would supply an additional $30 million in each of the next two years, closing the fiscal gap for these chronically underfunded agencies.

For police reforms it would fund $1.4 million annually for a new Office of the Inspector General within the Division of Criminal Justice. The IG would investigate — independent of prosecutors who daily work with police — shootings involving police or allegations of police misconduct.

With Appropriations and the administration not far off, reaching a deal to approve a budget by the scheduled adjournment of the legislature, June 9, would not appear a heavy lift.

The problem is how to pay for it.

Why the Connecticut legislature continues to separate responsibility for the two indivisible elements of budgeting — spending and revenue — is mind boggling. These duties should be combined in a single Ways and Means Committee. But, no, Appropriations appropriates, while Finance, Revenue and Bonding proposes how to come up with the cash.

While the governor’s budget proposal leans heavily on increased federal spending and tapping some portion of a record budget surplus, the finance committee wants a big tax increase on the wealthy and reduced taxes for struggling low-income workers. The net result would be $600 million in higher taxes per year.

The finance committee’s plans include a 2% surcharge on capital gains for couples earning $1 million or more per year and individuals earning more than $500,000 per year. A brand-new consumption tax would be 0.7% for those earning between $500,000 and $2 million per year, 1.5% for those with a federal adjusted gross income of $13 million or more.

Meanwhile, it would raise the income tax credit for working poor families from 23% to 40% of the federal Earned Income Tax Credit, granting those households about $77 million more per year, while expanding eligibility to higher incomes.

The rich could afford the higher taxes, no doubt, but there is also the reality that they are likely to see federal tax increases with Democrats in control of Washington. If Connecticut piles on higher taxes, too, it will be all the more incentive for some to relocate to more tax-friendly states, taking their millions in tax revenues with them, as Lamont rightfully fears.

With the state realizing unprecedented levels of federal aid, a record surplus, and facing the need to get the economy growing as it moves out of the pandemic, big tax increases do not make sense. They could well prove self-defeating by suppressing job growth.

Most alarmingly, the finance committee plan creates an off-budget “equitable investment fund” to collect as much as $1 billion, including $500 million per year from the proposed consumption tax, along with taxes on marijuana if legalized recreationally, and other sources. It is a brazen move to circumvent the constitutional spending cap.

As the process moves toward negotiations between the appropriations and finance committees and the Lamont administration, the governor has the upper hand. The finance committee’s tax heavy, off-budget contrivance barely emerged out of committee on a 26-22 vote, with several Democrats joining Republicans in voting against.

Lamont has said he doesn’t support the finance committee’s approach. It would be appropriate at this time for him to draw a clearer line, indicating what is open to discussion and what he finds non-negotiable. Ideally, he is able to work with the legislature to achieve some of the initiatives contained in the Appropriations Committee budget, while holding true to his stated goal of side-stepping broad tax increases.

 

The Day editorial board meets regularly with political, business and community leaders and convenes weekly to formulate editorial viewpoints. It is composed of President and Publisher Tim Dwyer, Editorial Page Editor Paul Choiniere, Managing Editor Izaskun E. Larrañeta, staff writer Erica Moser and retired deputy managing editor Lisa McGinley. However, only the publisher and editorial page editor are responsible for developing the editorial opinions. The board operates independently from the Day newsroom.

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