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    Saturday, May 04, 2024

    Tax hike stuffs state coffers with extra cash

    Hartford - Income tax increases, including higher taxes retroactive to January, are generating a windfall for Connecticut's state coffers.

    Revenue in November was $553.7 million, up 56 percent compared with last year.

    The large increase was partly the result of payments that were due in October but allowed to be paid in November because of Tropical Storm Irene in August and the destructive October snowstorm, said Sarah Kaufman, the spokeswoman for the Department of Revenue Services.

    But there appeared to be no loss in income tax revenue in October as a result of the deferred payments. Revenue rose by 24 percent from October 2010, to $478.1 million.

    The November rise also was due to an extra Wednesday, a tax-payment day, Kaufman said.

    Since tax increases took effect in the summer, the amount in income taxes withheld from workers' paychecks increased significantly compared with the same months in 2010: 24 percent in August, 19 percent in September, 32 percent in October and 39 percent in November.

    Rep. Patricia Widlitz, a Democrat and House chairwoman of the legislature's Finance, Revenue and Bonding Committee, said the increase revenue is needed not only to close the deficit but also to fund high-cost programs such as education and health care and pay down debt.

    "No one thanked me for raising their taxes," she said. "We're taking it head-on to address it responsibly."

    State revenue is experiencing a "dramatic increase" at a time when the economy is still weak and unemployment was 8.7 percent in October, added Sen. Andrew Roraback, the ranking Republican on the committee.

    "If those revenues were coming because the economy is booming and people had jobs, that would be something to celebrate," he said. "It's not because of greater economic activity, but because we passed the largest tax hike in history."

    The income tax increases, new taxes on items that previously were tax-free and a higher sales tax could generate a surplus of more than $100 million.

    But Roraback said tax revenue can be difficult to predict. For example, the volatile stock market can increase or shrink the taxable incomes of Wall Street brokers who live in Connecticut. It also depends on whether enough savings can be achieved in an agreement negotiated with state workers and other factors, he said.

    Republicans took particular aim at the income tax increase that was made retroactive to January. The retroactive increase will end next month, reducing somewhat the rise in revenue, which Roraback compared to a "sugar high."

    Department of Revenue Services Commissioner Kevin Sullivan said in July that tax increases are relatively minor for low- and medium-income earners. Single taxpayers with incomes of $50,000 a year or less and married filers earning $100,000 a year or less would not see a change in withholding and estimated payments, he said.

    The income tax increases were part of Democratic Gov. Dannel P. Malloy's plan to balance the state's two-year, $40.1 billion budget, which faced a deficit of about $3.3 billion in the first year. Other tax increases, such as raising the sales tax from 6 percent to 6.35 percent, also were enacted.

    Many states are benefiting from rising tax revenue. The Nelson A. Rockefeller Institute on Government in Albany, N.Y., said preliminary tax collection data for the July-September quarter show rising state tax collections. Personal income taxes "provided a particularly strong contribution to state treasuries," rising $5.1 billion, or 9.2 percent, the institute said.

    Despite that strength, there are indications that "there may be a softening coming for state tax revenue," said Robert Ward, the institute's deputy director.

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