Gov. Dannel P. Malloy answers questions from reporters after a state Bond Commission meeting Wednesday. At right is Lt. Gov. Nancy Wyman. MARK PAZNIOKAS / CTMIRROR.ORG

Despite the likelihood of deep spending cuts in Gov. Dannel P. Malloy’s next budget, the prospects of tax relief for consumers, retired teachers and the working poor are good.

But for Connecticut’s businesses – not so much.

“I think we’ll be able to accommodate those,” Malloy told Capitol reporters Wednesday, referring to several approved cuts scheduled to begin next year.

The tax relief the governor specifically was referring to includes:

  • Restoration of sales tax exemptions on clothing and footwear costing less than $50 and on non-prescription medication, worth $145 million and $16.5 million, respectively.
  • Creation of a new state income tax credit for retired Connecticut teachers, worth $12 million.
  • And an increase in the state’s Earned Income Tax Credit for working poor households from 27.5 percent to 30 percent of the federal credit, which is worth $11 million.

The governor added that, “We’ll be in the process of implementing other steps as well” to provide tax relief. But it was unclear whether the new tax breaks he introduced on the campaign trail last fall – benefitting those with student loan debt and urban businesses that add jobs – would begin next fiscal year or farther down the road.

Those tax cuts could prove controversial given that the legislature’s nonpartisan Office of Fiscal Analysis is projecting a $1.3 billion deficit in the next state budget, and the governor reaffirmed his intention to close it largely with spending cuts.

But Malloy tried to create room Wednesday for a new position on the controversial 20 percent surcharge on Connecticut’s corporation tax, which is worth $75 million per year and is set to expire in January.

The governor and legislature originally imposed a two-year surcharge on corporations back in 2011 to help close a record-setting $3.7 billion state budget deficit.

But before that surcharge expired at the end of December 2013, Malloy and lawmakers extended it for another two years.

When asked Wednesday about the likelihood that the surcharge will expire as planned this time, Malloy said: “With respect to the surcharge, I’ve not taken a position.”

But that wasn’t the case on Sept. 8 when the governor was on the campaign trail announcing a new tax break to spur job growth in Connecticut’s cities.

When asked by The Mirror whether he would have to renege on tax relief already signed into law to close the post-election deficit and deliver the new tax breaks promised during the campaign, Malloy said: “I don’t think that will be necessary, to tell you the truth.”

Joseph Brennan, senior vice president of the Connecticut Business and Industry Association, told The Mirror last week that companies statewide are counting on the surcharge’s going away.

“They are always looking long-term,” Brennan said, adding that providing the long-delayed tax relief is crucial to elevate business confidence and encourage job growth. “Having some measure of certainty, of predictability, when it comes to taxes – that’s what we hear from our members all of the time, The less stable the environment, the more difficult it is to encourage that investment in jobs.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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