Coalition presses officials to reconsider taxing the rich

Advocates for social services, labor  and municipalities appealed Wednesday for legislators and Gov. Dannel P. Malloy to consider  higher income taxes on the wealthy, tolls, a sales tax expansion and other revenue hikes to avert deep budget cuts.

The “All Hands on Deck” coalition also warned Connecticut is on the cusp of shifting surging retirement benefit and other debt costs onto its low- and middle-income residents, which would greatly harm the state’s overall quality of life.

But advocates also acknowledged they face an uphill battle. Malloy, a Democrat, has pressed lawmakers all session to avoid raising income or sales tax rates and to minimize the overall role of revenue in balancing the next two-year state budget.

Democratic legislative leaders also have said they believe a majority of their caucuses want to avoid major tax hikes while Republicans maintain their traditional staunch opposition toward boosting tax revenues.

“We are committed to a Connecticut that has a fully funded educational system … and a high-quality safety net,” said Ann Pratt, spokeswoman for the Connecticut Citizens Action Group. “This is the Connecticut we are here for.”

“Please do what is right,” Arnold Nicholson, a member of SEIU 1199 New England and a home care worker for disabled veterans, said in an appeal to legislators and to the governor. “Please reach down in the recesses of your heart and do the right thing.”

Malloy and lawmakers, who already authorized major tax hikes in 2011 and 2015, have been trying to mitigate revenue increases this time around to close major projected deficits.

Analysts have said state finances, unless adjusted, would run $2.3 billion, or 12 percent, in deficit this fiscal year and $2.8 billion, or 14 percent, in the red in 2018-19.

The concessions deal ratified earlier this summer by state employee unions and the legislature reduces those potential shortfalls to about $1.6 billion in the first year and $1.9 billion in the second.

The governor and Democratic lawmakers have discussed various revenue options to complement spending cuts to attack those projected gaps.

Those revenue proposals include: a 45-cents-per-pack cigarette tax hike; restricting income tax credits for the working poor and middle class; boosting the sales tax rate; and billing cities and towns for $400 million per year to help cover teacher pension costs.

Except for proposals to boost real estate conveyance taxes on transactions involving properties worth more than $800,000 and to end nonprofit hospitals’ exemption from municipal taxation, none of the major proposals have been aimed at wealthy households or corporations.

Lawmakers and Malloy also have proposed reductions in local aid and to social services, including removing an estimated 9,500 poor adults from the Husky health insurance program.

Cheryl Greenberg, vice chairwoman of the West Hartford Board of Education, said the education grant reductions Malloy has ordered since Connecticut entered the new fiscal year on July 1 without a state budget wiped out one-sixth of all school-based aid to her community.

“This is not a budget cut. This is a budget shift,” she said, adding that the state is simply moving its fiscal problems onto the property tax base across Connecticut.

The property tax generally is recognized as the single-most regressive levy imposed at either the state or local level in Connecticut.

Among the alternative revenue policies advocates recommended Wednesday include boosting income tax rates on the wealthiest households.

Tim Foley from SEIU State Council, which represents 65,000 retired union members in the state, said Connecticut’s top marginal income tax rates remain well below those in New York state, New York city and in New Jersey.

Adding one-half of 1 percentage point to the top marginal rate of 6.99 percent, which is imposed on households earning more than $500,000, would bring in about $218 million per year, the group projects.

Foley also rejected the argument that Malloy and some legislators have made that declining state income tax receipts are due to an exodus of wealthy households in response to the 2011 and 2015 income tax hikes.

“It’s a great ghost story,” Foley said, adding that the number of state income tax filers reporting earnings in excess of $1 million only has grown since 2011.

Other revenue proposals suggested by the advocates on Wednesday include:

• Imposing fees on employers that pay wages below $15 per hour.
• Closing sales tax exemptions and rate discounts on computer processing services and legal fees. Some revenues from these changes should be used to lower the overall sales tax rate below 6.35 percent while others could be used to mitigate the projected deficits.
• Legalizing and taxing recreational marijuana use.
• Imposing a sales tax surcharge on sweetened beverages.
• Restoring tolls to state highways.

The group also recommended that the state reduce subsidies and grants to major corporations.