A spoonful of sugar helps the medicine go down
New governor's budget strategy part sweet, part sour
Gov. Ned Lamont will give with one hand and take with the other in the budget he proposes Wednesday.
Lamont will naturally stress the giving, as he did during the campaign last fall. But when it comes to taxes and fees, the scales will tip toward the taking — at least for the next two years — as the new governor attempts to wipe out about $3.5 billion in inherited red ink off Connecticut’s books.
For example, Lamont said this weekend he would consider lowering gas taxes and boosting income tax relief for the poor — but only to mitigate the pain of restoring tolls to Connecticut’s highways.
Many lawmakers expect Lamont to propose a repeal of the estate tax, something he called “an enormous giveaway to the very wealthiest” days before the November election. But they also expect him to recommend a statewide property tax on motor vehicles — which would cut taxes for most communities but boost them in affluent towns.
Poor and middle-class taxpayers would benefit from the property tax relief Lamont pledged on the campaign trail. This involves increasing the property tax credit within the state income tax. But his campaign proposal deferred most of that relief until the 2021-22 fiscal year.
In the meantime, though, middle and low-income consumers can expect to face new charges on sugary drinks, plastic bags, vaping products, marijuana, sports betting and alcoholic beverage deposits.
The governor also warned he would cancel some sales tax exemptions, including the partial exemption on digital downloads.
“I can hold the line (but) some of you are going to be disappointed that we’re not cutting a lot more a lot faster on the operating side,” Lamont told Waterbury-area business leaders at a chamber of commerce meeting last Tuesday.
How did Lamont, who downplayed tax hikes on the campaign trail, explain his reversal?
He underestimated how difficult it would be to cut the pension and other debt costs that are placing unprecedented pressure on state finances.
“Maybe I thought that this was an iceberg that was a little over the horizon,” Lamont said of costs that consumed 10 percent of the General Fund two decades ago, and now eat up about 30 percent. “As we got into the books and looked at the numbers (we realized) we’ve got to hit it head-on, right now.”
Those debt costs, some of which are projected to continue rising into the early 2030s, “have put us on a razor’s edge in terms of fiscal stability,” Lamont added. “We’re going to have to solve this together.”
According to projections from nonpartisan fiscal analysts, state finances — unless adjusted — will run about $1.5 billion in deficit next fiscal year, and $2 billion in the red in 2020-21.
The Democratic governor was accused repeatedly last fall by his Republican opponent, Madison businessman Bob Stefanowski, of planning major tax and fee hikes.
For example, Lamont insisted during the campaignhe would impose electronic tolling, but only on trucks — an assertion Stefanowski predicted would change if Lamont won.
In an op-ed piece released Saturday, the governor conceded truck-only tolls probably won’t raise sufficient revenue to reverse years of inadequate investment in highways, bridge and rail upgrades.
“The truck-only option provides too little revenue, too slowly and too piecemeal to make a meaningful difference,” wrote Lamont, who insists Connecticut must make strategic upgrades to a clogged system to spur economic development. A crucial upgrade, according to Lamont, is to accelerate rail commuting times between Hartford, New Haven, and New York City.
Tolls on trucks are projected to raise between $45 million and $200 million per year, depending on which routes are tolled. Imposing a charge on all vehicles and on all major highways is expected to raise between $800 million and $1 billion annually, depending on the level of discounts provided to Connecticut motorists.
Lamont’s chief of staff, Ryan Drajewicz, told reporters Sunday that the administration’s modified position on tolls “is the start of a discussion, not the end.”
The governor remains open to exploring multiple options, Drajewicz said, provided it is done “in an open, honest and objective way.”
But weren’t the fiscal realities surrounding tolls and Connecticut’s aging transportation system available during the campaign?
Gov. Dannel P. Malloy, Lamont’s predecessor, spent much of his final two years on the job arguing that the existing transportation program — which is supported largely with the state’s two fuel taxes — lacks the resources to do more than basic maintenance.
“There’s a difference between when you are in the heat of the campaign … and in the governor’s office” and confronted by the “full suite of facts,” Drajewicz said. “You’re staring at those numbers in a very hard, real way.”
Democrats, who hold majorities in the House and Senate, were split over tolls during the last two-year term. Republicans largely have been — and remain — unified in their opposition.
Lamont tried to cushion the blow of his support for tolling cars by emphasizing he would insist on major discounts for Connecticut motorists and frequent drivers.
But Senate Minority Leader Len Fasano, R-North Haven, called that “a disingenuous attempt to curtail criticism. Currently, residents do not pay any tolls in Connecticut. So you can tout a ‘discount’ all you want, but the truth is families are going to be paying more than they already do today if tolls are installed. …The money has to come from somewhere, and that somewhere is state taxpayers.”
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