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November 17, 2019

Politics

House Speaker Joe Aresimowicz called a proposed hospital tax "a game-changer in the budget."
Republican Bob Stefanowski, left, and Democrat Ned Lamont during a televised debate in the race for governor. Whether Connecticut should restore tolls on state highways for the first time since 1983 was a frequent topic during last year's debates.

Will Hospitals, Capital Gains, Soda Be Taxed To Balance State Budget?

Connecticut's state legislative session is coming to a close. While there are still many uncertainties, electronic tolls is not one of them.

“My first priority is to get an honestly balanced budget done on time,” Gov. Ned Lamont said. 

Lamont's amended two-year, $43 billion budget plan includes:

  • -- Hundreds of millions of dollars in across-the-board tax hikes,
  • -- A plan to shift the rising cost of teachers' pension onto cities and towns,
  • -- A 1 percent tax hike on food sold in restaurants and other ready-to-eat meals,
  • -- A 2 percent surcharge on capital gains taxes, raising up to $200 million annually.
  • -- Changing the hospital tax formula, raising $270 million more annually.
  • -- Nickel hike on ride-share services like Lyft and Uber, up to 30 cents per ride.

House Speaker Joe Aresimowicz, a Democrat from Berlin called uncertainty surrounding the hospital tax "a game-changer in the budget."

A tentative deal would eliminate the increase in capital gains taxes and Lamont's teacher pension proposal in exchange for eliminating a tax on soda and other sugary beverages. The soda tax and teachers’ pensions ranked among the least popular proposals at the Capitol.

Lamont and state legislators could not reach an agreement on restoring tolls on state highways for the first time since 1983.

However, Lamont, insistent on installing 50 electronic tolls on five state highways, said he may call legislators back for a special session this summer. The latest draft of the bill, titled "An Act Concerning the Sustainability of Connecticut's Infrastructure," reduces the number of toll plazas by 10 statewide while detailing what roads, bridges and rail stations must be fixed initially using the new revenue. House Bill 7202 can be found by clicking here. The latest bill calls for creation of a Connecticut Transportation Commission composed of six lawmakers, six administration officials or appointees and the state Treasurer. The bill requires discounts for state drivers and creates a mechanism for to lower fuel taxes with an improving economy.

Lamont needs support from 76 of 91 House Democrats and at least 18 of the Senate's 22 Democrats to approve tolls. Senate President Pro Tem Martin M. Looney, a Democrat from New Haven, said the draft is a work in progress, subject to negotiation once the special session begins.

There was some good news in the budget for high school graduates planning to attend community college in Connecticut. Beginning in the fall of 2020, Connecticut high school graduates would be eligible for debt-free community college. Full-time students would receive grants to cover any tuition and fees that are not covered by scholarships, federal student aid or other grants. The program would be funded by revenue from a new online lottery program.

Regarding the proposed increase in hospital taxes, Jennifer Jackson, CEO of the Connecticut Hospital Association, said in a statement that the hospitals continue to have good faith negotiations with the Lamont Administration. 

House Speaker Aresimowicz said that not knowing whether state lawmakers can rely on hospital tax revenue makes it harder to estimate the size of the state's two-year budget deficit -- now projected at nearly $4 billion. The deadline to finalize a a budget is June 5.

A group of 63 Democratic legislators sent a letter to Lamont on May 23 asking him to support the surcharge on capital gains for couples making more than $1 million a year, and individuals making more than $500,000 annually. (See their letter in a PDF attached below.)

Seven of Connecticut's 36 Senators and 56 state Representatives -- or more than a third of the 151 House members -- wrote it’s only fair for the state's richest residents to pay more: "Our state relies heavily on regressive sales and property taxes, while employing merely a moderately progressive income tax," the lawmakers wrote. "This structure soaks the middle class, taking over 12 percent of their income in state and local taxes. Meanwhile, those in the top one percent pay only 8.1 percent of their income in taxes according to the Department of Revenue Services."

They added: "Since the Great Recession, Connecticut’s top one percent has garnered 100 percent of increased income and received a windfall from the Trump tax cuts. Meanwhile, the middle class has seen their incomes stagnate as they continue to shoulder a disproportionate tax burden. . . ."

If they can't increase the capital gains tax on the wealthiest residents, some Democratic legislators seek a "mansion tax'' on the sale of homes worth more than $2.5 million. 

Democrats also want a 10-cent fee on plastic bags, to raise about $30 million in the first fiscal year that starts July 1. The fee would later be replaced by a total ban on plastic bags effective July 1, 2021. 

See Attachment