Connecticut finance panel backs nearly $900 million in tax-cut options
Finance panel backs broad tax-cut package
Connecticut appeared headed for an unusual showdown over tax cuts late Monday after a key legislative panel endorsed nearly $900 million in relief options, including new aid for renters and expanded breaks for shoppers and seniors.
The debate now centers on how much tax relief the state can afford, what form it should take and whether it should be temporary or ongoing. Gov. Ned Lamont favors a one-time rebate, while most lawmakers want some form of continuing relief.
House lawmakers in both parties have leaned toward more modest cuts, citing major fiscal challenges ahead. Senators have tended to support a larger package, arguing that the high cost of living is hurting too many families.
Sen. John Fonfara, D-Hartford, co-chair of the Finance, Revenue and Bonding Committee, said the panel was signaling a desire to address affordability in Connecticut. The committee must complete its revenue proposals by the end of Tuesday for the next budget cycle.
Those bills, combined with a spending plan from the Appropriations Committee, will form the General Assembly’s response to the $28.7 billion budget Lamont proposed in early February for the fiscal year beginning July 1. The administration and legislative leaders then will negotiate a compromise budget before the regular 2026 session ends May 6.
Renters and sales-tax exemptions lead the package
The largest tax-cutting bill approved Monday by the Democratic-controlled committee would broaden or create several sales-tax exemptions effective July 1. The biggest change would remove the 6.35% sales tax on all clothing and footwear items costing $100 or less. Connecticut currently waives that tax only for one week each August during its sales-tax holiday.
The measure also would eliminate sales tax on non-electronic school supplies such as backpacks, lunch boxes, pens, pencils and paper; on energy-efficient appliances including air conditioners, washers, dryers and furnaces; and on sandwiches and other takeout food sold at supermarkets.
The largest relief in that omnibus bill, however, would not begin until next January. It would come through new or expanded state income-tax credits, most notably a new credit for low- and middle-income renters worth up to $1,000 annually. Nonpartisan analysts estimated that credit alone would cost the state about $202 million.
Some lawmakers want broader renter relief. A second bill approved Monday would allow a rent credit of as much as $2,500, at an estimated annual cost of about $575 million. The committee also backed creation of a new rental registry to collect more data on affordability and living costs in Connecticut. Owners and operators of rental properties would pay a $100 annual registration fee and could face civil penalties of up to $1,000 for failing to comply.
Affordability push meets fiscal caution
Although many of the measures won bipartisan support in committee, lawmakers cautioned that support at that stage does not guarantee inclusion in the final budget.
Rep. Joe Polletta of Watertown, the ranking House Republican on the finance panel, said he and his caucus support tax cuts that make Connecticut more affordable and prefer recurring relief over Lamont’s proposed one-time $200-per-person rebate this October. Still, he warned that the committee’s nearly $900 million package carries a hefty price tag and said lawmakers should be careful not to overcommit.
Lamont has said the state can afford the roughly $500 million rebate for now, but not hundreds of millions in permanent annual tax cuts, despite average surpluses of about $1.8 billion a year since budget caps were strengthened in 2017. He wants most surplus dollars to continue paying down state pension debt, which still exceeds $33 billion, and has also expressed concern about major reductions in federal Medicaid assistance expected next fiscal year.
Rep. Maria Horn, a Salisbury Democrat and House chair of the finance committee, also urged caution, noting lawmakers have pledged major investments in affordable child care and education aid to cities and towns. House Minority Leader Vincent J. Candelora, R-North Branford, said before the committee meeting that there was no way all of the endorsed relief proposals would make it into the final budget.
Meanwhile, Senate Republicans have proposed even larger tax cuts, centered on income and payroll taxes, that they say could deliver more than $1,500 per year to middle-class households. But based on the latest budget and revenue projections, that plan could eliminate most or all budget surplus funds and potentially push the state into deficit within a few years. Sen. Ryan Fazio of Greenwich, the ranking GOP senator on the finance panel and a gubernatorial candidate, said the committee’s proposals were too limited and too narrowly targeted to provide sufficient help.