Bob Stefanowski unveils $2 billion tax relief plan for CT

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Republican gubernatorial candidate Bob Stefanowski on Tuesday unveiled a nearly $2 billion tax relief plan that would ease the burden on consumers, small businesses and those who pay property taxes, expand the exemption from the state fuel tax and extend it through 2023, and support people in need of money. unemployment trust.

Stefanowski, who shot for the fiscal moon four years ago when he pledged to phase out state income tax, offered a tempered plan on Tuesday that he said would bring significant relief families hit by inflation.

The proposal would reduce the record fiscal firewall Governor Ned Lamont and the Legislature have amassed against the next recession.

It would also be difficult for Connecticut to accelerate retirement debt repayment in good years. But Stefanowski says that if more tax relief can revive the economy, the state will ultimately be in a better position to pay off its pension debt faster too.

“Our view is that people are struggling right now,” the Madison businessman told the CT Mirror, adding that high energy costs and inflation-driven cost hikes in many areas have left too many struggling households and small businesses.

And while it’s important for the state government to protect its finances against the next economic downturn, Lamont and his fellow Democrats have overspent — at taxpayer expense, Stefanowski said.

A better approach, he added, is to invest some of that tax cushion in families and businesses and help them get back on their feet.

“We don’t spend it all,” Stefanowski said. “We try to be conservative. We think this is a reasonable and pragmatic approach to providing relief to people at this time.

Stefanowski frustrated Lamont and many Democrats in 2018 when he proposed phasing out state income taxes, which generate about half of the revenue that supports the General Fund. This fiscal year, it is expected to generate $11.7 billion or 53%. Stefanowski had given no details on how he could eliminate this source of income while meeting all state tax obligations.

“Bob has spent years detailing his economic plans that would cut money from our schools, hospitals and resources for our seniors,” Lamont campaign spokesman Jake Lewis said Tuesday. “His priorities are so extreme that he once said he wanted to ‘rip the guts out’ of the state budget. Governor Lamont has returned our state to fiscal health and balanced budgets through responsible management; while delivering the largest tax cut in state history and paying down debt, saving future generations hundreds of millions of dollars.

Extended gas tax holiday for all of 2023

Most of the aid Stefanowski offered on Tuesday — a relatively smaller $800 million — would be for motorists.

Lamont and lawmakers have suspended the state’s 25-cent-per-gallon retail gasoline tax since April. This fuel festival is due to expire on December 1.

Stefanowski would reinstate that as soon as possible after he potentially takes office on Jan. 4 and maintain the tax exemption through calendar year 2023. But he would also target two other related levies.

The state’s wholesale fuel tax – equal to 8.81% of the wholesale price – would also be suspended. Based on the latest average wholesale price in New Haven Harbor of $2.45 per gallon, this currently adds about 21.5 cents per gallon to the retail price of gasoline.

Stefanowski’s plan would also suspend the entire diesel fuel tax. The tax, which is adjusted annually in July based on wholesale diesel prices, jumped more than nine cents last summer to 49.2 cents a gallon.

Helping families with property and sales taxes

But while fuel tax relief is a one-time endeavor, about $750 million of Stefanowski’s plan involves ongoing relief.

To counter rising property taxes, the campaign proposed allowing families earning less than $400,000 a year — and single people earning less than $200,000 — to deduct up to $10,000 from their taxable income to account for municipal property taxes they paid.

Stefanowski predicts this would save about $350 million and represent about $600 a year for many middle-class families. The actual savings, however, is about half of that, as the new deduction would replace the $300 property tax credit already set in state income tax, which should allow households to save collectively. about $175 million next year.

The campaign would also reduce sales tax from 6.35% to 5.99% and eliminate the 1% surtax on restaurant meals and other prepared foods.

It would cost about $270 million from the state’s general fund and an additional $125 million from its special transportation fund.

Other elements of Stefanowski’s tax cut plan include:

  • The repeal of the new highway user fees is expected to begin in January. Aimed at large commercial trucks — excluding dairy vehicles — it’s expected to cost trucking companies about $90 million a year, according to nonpartisan tax analysts. Opponents argue that additional transportation costs will be added to the retail price of groceries, department store products and other items, compounding the effects of already high inflation.
  • Strengthen a business tax credit that would save small businesses about $50 million a year.
  • Deposited about $450 million into the state’s unemployment trust, which has run up about $1 billion in debt since the coronavirus pandemic began and demand for unemployment benefits has increased. Companies are assessed quarterly to help replenish the fund.
  • Cancellation of approximately 200 small fees and other “harmful” taxes usually imposed to register businesses. Stefanowski, who announced the initiative earlier this summer, said he believes it will save businesses around $50 million a year.

Reduce the state tax cushion

Stefanowski insists the plan is well within the state government’s affordability range.

About $1.3 billion of the relief is one-time in nature. Connecticut has a record $3.3 billion in its rainy day fund.

The state also has about $200 million in federal COVID relief funds from the American Rescue Plan Act that it has yet to commit and an additional $1.45 billion from ARPA that it still has. related to spending initiatives through 2025.

Stefanowski’s plan could reduce reserves to about $2 billion, which is 9% of annual operating costs. For decades, the state comptroller’s office said a 15% cushion was needed to guard against a sharp economic downturn.

Things might be a bit tougher when it comes to the ongoing tax relief that Stefanowski wants to provide starting in the 2023-24 fiscal year — the state’s first new budget after the election.

At first glance, state finances will already be in trouble by then.

According to the legislature’s nonpartisan Office of Budget Analysis, the general fund of the budget, unless adjusted, would show a deficit of $800 million.

But things are not that simple. Indeed, since 2018, the State has implemented a new budgetary rule which obliges it to save part of the tax revenue linked to capital gains, dividends and quarterly declarations of business tax.

This provision for savings is expected to yield $1.2 billion in fiscal year 2023-24. This is more than enough to cover the $800 million “gap” while leaving an additional $400 million for other initiatives. But this savings provision is known as the “volatility adjustment” because tax revenues from the investments it manages have fluctuated – historically – by very wide margins and can disappear as quickly as they increase.

But Stefanowski says he thinks he can fund his tax cut without even having to tamper with the savings program. Reiterating a promise from his 2018 gubernatorial bid, he insists his administration would audit every state agency and find new ways to cut costs.

The Madison businessman says if he could cut the state budget by 4%, he could save $1 billion and easily fund the annual cost of his ongoing tax relief.

“I have to believe I can find 4% savings in this bloated budget, and I have a reputation for doing a lot more than that,” he said.

Democratic state officials and other critics of Stefanowski counter that he does not fully understand the limited flexibility of Connecticut’s state budget, which is heavily constrained by fixed costs involving bond debt, unfunded pension, Medicaid, and wages set by contract.

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