CT budget chief: GOP business tax cut ‘worth considering’
Gov. Dannel P. Malloy’s budget chief left the door open Thursday for the administration to support a House Republican initiative to provide $60 million in tax relief to small businesses.
But Office of Policy and Management Secretary Benjamin Barnes also told the legislature’s tax-writing panel that the Democratic governor’s primary plans for this year’s $500 million surplus involve a $55-per-person rebate to low- and middle-income taxpayers, and deposits into the pension fund and emergency budget reserve.
“We may well indeed think that that’s something worth considering,” Barnes told Rep. Sean Williams of Watertown, the ranking House Republican on the Finance, Revenue and Bonding Committee.
Williams had asked Barnes for his take on a House GOP proposal to use $60 million of this fiscal year’s projected surplus to pay the remaining interest the state owes the federal government on a special unemployment insurance loan taken out during the last recession. The state has been placing special assessments on Connecticut’s businesses to cover those interest charges. Businesses already have paid $71 million.
Barnes said that proposal is one of several revenue proposals his office is analyzing, calling it “another reasonable use of those (surplus) funds.”
State Comptroller Kevin P. Lembo is projecting a $504.4 million surplus for the fiscal year that ends June 30.
Malloy proposed three uses for those funds when he delivered his new budget plan to the legislature in early February:
- Depositing $250 million to the budget reserve, commonly called the “Rainy Day Fund,” effectively doubling the state’s emergency fund account.
- Making a $100 million supplemental payment to the state employees’ pension fund. After decades of underfunding and raids by past governors and legislatures, the fund had enough assets to cover just 42 percent of its long-term obligations as of its last valuation in June 2012. Analysts typically cite 80 percent as a healthy funded ratio.
- And returning $155 million to taxpayers through rebates, which would be available to individuals earning less than $200,000 per year and couples earning less than $400,000. Technically, the administration is considering the checks to be refunds of gasoline and sales taxes. Barnes estimated households would receive their rebate checks in early September. Though the fiscal year ends June 30, the comptroller doesn’t officially close the books on that year until the end of August.
“We obviously have many demands on the surplus funds,” Barnes said.
Republicans, who hold just 52 of 151 seats in the House, have argued that their small business tax break would enable businesses to add jobs and otherwise invest in their operations.
House Minority Leader Lawrence F. Cafero, R-Norwalk, testified in favor of the plan earlier this week during a public hearing before the Labor and Public Employees Committee, where the GOP bill is pending. If approved by that committee, the bill would head to Finance.
“It doesn’t cost much when compared to the total amount our taxpayers have been overcharged,” Cafero said. “But it would be a huge benefit to our state’s businesses – and would go a long way toward convincing them that we’re serious about removing burdens from them when we can.”
“I would argue this would have a far greater stimulative effect” on the economy than the rebate plan would, Williams told Barnes Thursday.
But Barnes said, “People are very likely to spend that” rebate money, rather than save it. He cited a projection from The University of Connecticut’s Center on Economic Analysis, which estimated that $155 million in consumer spending would generate enough activity to generate about 1,000 new jobs.
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