Much of Tom Foley’s last-minute proposal to cut taxes on Social Security benefits already is covered in existing state law.
And the GOP gubernatorial nominee’s overall tax relief proposal on retirement benefits would expand Connecticut’s post-election deficit by roughly $100 million next fiscal year.
The Greenwich businessman used Sunday’s final gubernatorial debate to unveil a two-pronged tax relief proposal for retirees, exempting both Social Security benefits and teachers’ pensions from the state income tax.
According to a previous analysis by nonpartisan legislative analysts, exempting all Social Security benefits would cost the state about $40 million in the next budget.
That’s because Connecticut already largely exempts Social Security earnings from taxation. Individual filers with annual incomes above $50,000, and couples topping $60,000, only pay state taxes on one-quarter of their Social Security benefits.
Those with incomes below those thresholds face no tax on Social Security.
“This is a plan proposed by someone who doesn’t understand current law,” Roy Occhiogrosso, senior adviser to Gov. Dannel P. Malloy’s re-election campaign, said Monday. “And all this would do is benefit well-off retirees. Much of what he has proposed is already in law.”
Foley repeatedly has attacked Malloy for signing more than $1.8 billion in tax hikes into law in 2011 to help close the nearly $3.7 billion budget deficit the governor inherited upon taking office.
The second half of Foley’s proposal would exempt the entire pension of retired Connecticut teachers from the state income tax. Malloy signed into law this summer a measure that gradually exempts a portion of teachers’ pensions.
A 10 percent exemption next year increases to 25 percent in 2016 and peaks at 50 percent in 2017. The overwhelming majority of Connecticut teachers are not eligible for Social Security benefits.
Based on the nonpartisan analysts’ estimate that this new exemption will cost $29 million per year when fully implemented, Foley’s proposal to exempt all pensions should cost between $55 million and $60 million per year.
It also means Foley’s full plan would cost about $100 million annually. Coupled with his earlier proposals to reduce sales and local car taxes – the latter cost being borne by state government, Foley has now proposed roughly $460 million in tax cuts.
But he has not provided many details on how he would pay for them, or how he would close the $1.4 billion deficit nonpartisan analysts are projecting for the first new budget after the election.
Foley’s tax relief proposals would swell the projected deficit beyond $1.8 billion, or more than 10 percent of annual operating expenses.