Connecticut Governor Ned Lamont (D) has signed a two-year, $51 billion state budget passed by the General Assembly last week which includes a historic cut to the state’s personal income tax.
According to NBC Connecticut, “The reduction in the income tax has been predicted to benefit around 1 million of the state’s 1.7 million tax filers by permanently lowering marginal rates for the first time since 1996. It’s being billed as the largest reduction since the tax was first implemented in 1991.”
Under the new reduction of the Personal Income Tax as explained by the governor’s office it will help middle-class families.
“An income tax cut for the middle class that reduces the two lowest marginal rates. Specifically, the 3% rate on the first $10,000 earned by individuals and the first $20,000 by couples will decrease to 2%. The 5% rate on the next $40,000 earned by individuals and the next $80,000 by couples will decrease to 4.5%. These benefits will be capped at individual filers who earn $150,000 and couples who earn $300,000. It is estimated that one million tax filers will benefit from the rate cuts.”
Since 2020, more than 20 states have cut income taxes. This wave of tax cuts has been carried by Red States, while any Democrat-controlled states only sent stimulus checks out – spending money instead of implementing permanent tax relief.
Could Connecticut enacting a permanent rate reduction lead to more Democrat-run states following suit?
As for the rest of the budget, there was little good news there for taxpayers.
The state Earned Income Tax Credit (EITC) was expanded “from the current rate of 30.5% of the federal credit to 40%.”
A student loan bailout was also part of the budget. The $6 million pilot program will reimburse student loans.
The Yankee Institute stated, “To be eligible, participants must be residents of the state for at least five years; have an adjusted gross income of less than $125,000 for individual filers and $175,000 for joint filers; have a student loan from any public or private college; hold an occupational or professional license; and have left college in good academic standing before graduation.”
Additionally, “In exchange for this generous payout funded by taxpayers — including those who did not pursue further education after high school — recipients will have to volunteer a grueling fifty unpaid hours for each year of participation.”
More spending on affordable housing which will provide, “$150 million ($75 million annually) towards the state’s popular Time-To-Own program. This level of funding is expected to assist in the purchase of more than 1,250 homes annually.”
While the income tax cut is a big plus, it represents just a fraction of the numerous tax increases passed under recent governor Dannel Malloy. If the state continues to make progress on tax cuts, it will pose a major problem to high tax regional states like New York and New Jersey.