On April 22, Connecticut’s Democrat-dominated Appropriations and Finance, Revenue & Bonding committees held discussions and voted on proposed tax increases to implement within the pending state budget, which also includes a state spending increase.

The proposed package of new taxes is viewed by the lone Democrat among Newtown Legislative Delegation members — Representative Raghib Allie-Brennan — and other lawmakers as a starting point in negotiations with Governor Ned Lamont. Lamont is already on record stating he would not support the measure as proposed.

“It’s still early, but this budget is a strong foundation for negotiations with the Governor,” Rep Allie-Brennan told The Newtown Bee this week after reviewing the lengthy proposal.

The Bethel lawmaker, whose 2nd District includes several neighborhoods in western Newtown, said the proposal has at least some points of merit that are important to his constituents.

“I strongly support the decision to increase Education Cost Sharing grants for local school districts and address property tax relief for municipalities,” Allie-Brennan said.

Conversely, the balance of the local delegation — all Republicans — were immediately critical of the proposal and its raft of new taxation points.

GOP Representative Mitch Bolinsky of Newtown looked beyond immediate implications, noting the “5.5% increase in spending and $1.9 billion in new taxes over the next two years,” which will escalate to “$3.2 billion by year three.

“Even as a historic package of $6.2 billion in federal COVID-19 recovery funds flows into Connecticut through the American Rescue Plan Act, the Democrat-dominated Appropriations and Finance, Revenue & Bonding committees have countered the Governor’s relatively conservative budget stance to make Connecticut less affordable,” Bolinsky said via a constituent notification.

“Despite residents’ struggling to recover from the pandemic, pretty much everything we don’t grow in our own back yards will become more expensive,” the Newtown lawmaker chided. “My colleagues and I are vehemently opposed to putting more financial burdens on working and middle-class families. We believe the better way to invest in our state is to leverage a combination of state revenues, federal recovery funds and surplus rainy-day funds.”

Still Early, But...

Recently seated Republican 112th District Representative Tony Scott also observed the General Assembly is still in the early stages of budget development, but added it was “disheartening to see so many new tax proposals under consideration, especially when the state already expects to receive over $2 billion in federal aid and carries a hefty balance in its Rainy Day Fund.”

Rep Scott was more concerned that, “most of the revenue created by the sales taxes on recreational marijuana, the online gaming tax, the digital ad revenue tax, and the consumption tax would be shifted into an off-budget account not controlled by members of the legislature.”

“With the full voice of their representatives removed from the equation, that means less accountability and less transparency for taxpayers,” Rep Scott said. “Even Governor Lamont indicated that this level of taxation and lack of spending control is not something he would support.”

State Senator Tony Hwang noted that he “stood apart from a number of my colleagues in voting against [the bill] HB 6443 because I do not believe this is a reasonable or reliable roadmap to an economic recovery.

“The state cannot continue to feed this unsustainable demand on the state coffers by making Connecticut even less affordable to live and work,” Sen Hwang said. “There must be a greater effort to strengthen Connecticut’s workforce and recover the 120,000-plus jobs lost in 2020.”

Taking issue with the amount of time available for committee members to review the proposal before the vote, the senator added, “I am deeply disturbed that the Democratic leaders feel it is appropriate to create a new ‘Equitable Investment Fund’ account to direct revenue, separate from the General Fund, so the state can seemingly avoid exceeding the spending cap. Financial times are as critical as the public health crisis we have faced for the past year, and the state cannot afford this gamesmanship as we desperately try to regain our financial footing.”

According to details from Sen Hwang’s office, the Democrats’ plan, with $3.2 billion of new/increased taxes over the next three years, includes:

*A mileage tax on trucks ($45 million in FY23 and $90 million in FY 24);

*Canceling property tax relief ($53 million tax increase annually in FY 22 and FY 23);

*Canceling tax relief for job creators, 10% corporate tax surcharge ($80 million in FY 22, and $50 million annually in FY 23 and FY 24);

*A new $500 million annual consumption tax described by Democrats as a way to increase the sales tax rate on higher income residents;

*Imposing a convenience fee for credit/debit card use ($5 million annually in FY 23 and FY 24);

*New taxes related to gaming ($30.5 million in FY 22, $43.1 million in FY 23, $58.8 million in FY 24);

*New social media advertising tax ($150 million in FY 22, $162 million in FY 23, $175 million in FY 24);

*New 2% surcharge on capital gains ($262 million annually); and

*New taxes related to cannabis legalization ($11.1 million in FY 22, 39.5 million in FY 23, 73.1 million in FY 24).

A Bad Precedent

Rep Bolinsky believes the Democrats’ proposal with its regressive taxes “will most hurt those already struggling, as well as taxes that will drive away job creators which will force the working and middle class to shoulder even more of that burden in the future. And, in a first, the state’s biennial (2-year) budget includes tax increases for the next budget cycle, too.

“I don’t think this is a precedent we want to set,” Bolinsky proffered, “do you?”

The Newtown lawmaker observed that spending contained in the Democrats’ proposal far exceeds what is allowed under the state’s spending cap.

“To avoid the cap, Democrats are moving major spending and revenue items to newly created offline accounts to skirt taxpayer protections and avoid transparency. Their plan shifts FY 21 tax revenue into FY 22 and FY 23.”

He also took issue with the proposed off-budget account called the Equitable Investment Fund (EIF), which removes over $1B from the ledger.

“This flies in the face of the good fiscal policies that have enabled our state to grow its rainy-day fund to historic levels and achieve a triple-A bond rating,” Rep Bolinsky continued. “This proposal would undo that progress and sets us up for unsustainable spending.”

He further noted that the proposal contains at least $2 billion in one-time revenues that will result in an equal sized hole in the next budget.

“Translation: Guaranteed deficits as recovery funds dry-up, followed by greater out-year tax increases,” he said. “We need to make sure the state budget helps move our state beyond the pandemic and that federal funds are used for transformative policies that will set a new course for our state and its residents. But we also must not add new costs that our residents cannot afford over the long term.”

Rep Bolinsky fears if approved as presented, this new spending plan would simply “perpetuate a cycle of needing future federal assistance.”

Rep Allie-Brennan also referenced the $3 billion sitting in the state’s rainy day fund, that Connecticut is projected to end this fiscal year with another $800 million budget surplus, on top of the $2.6 billion in direct aid through the federal pandemic relief bill.

“While I am cautious about increasing spending before the state’s economy has fully recovered, amid the COVID-19 pandemic it is important that our vital services and programs have enough to meet the needs of Connecticut residents,” the 2nd District lawmaker said. “I will use my seat at the table and voice in the room to help us reach a reasonable middle ground that makes key investments while remaining under the statutory spending cap.”

Rep Scott joined the call for collaboration.

“We need to come together and build from the progress the state made in the 2018 budget, and that means having all parties at the table as equal negotiating partners,” he concluded. “Recent history has shown that the best results come from a bipartisan budget process; not only for state government, but for the taxpayers who ultimately pay the bill.”

Visit cga.ct.gov/2021/tob/h/pdf/2021hb-06443-r00-hb.pdf to download or review the proposal.

Associate Editor John Voket can be reached at john@thebee.com.