Soaring state tax revenues + taxpayers’ concerns should = no tax increases

(May 11, 2007) Taxes and the economy are the top problems facing Connecticut, according to respondents of a new statewide poll. And that news, along with far more robust state revenue projections, should give lawmakers enough encouragement to avoid raising taxes as they construct a new two-year state budget.

The legislature’s Office of Fiscal Analysis (OFA) this week projected a state budget surplus of $846.8 million for this fiscal year, which ends June 30. What’s more, OFA said that the state’s current tax structure will produce considerably more revenue over the next two years than originally expected.

This week, the state comptroller’s office also issued a new estimate, of a more modest but still substantial surplus of $627.3 million this fiscal year. Both offices said greater-than-expected revenue from the personal income tax and the corporate income tax have helped fuel the higher surplus estimates.

Meanwhile, results of the latest Quinnipiac University poll shows that concerns in Connecticut about taxes are the highest the poll has registered in more than a year, and fully 10% higher than recorded in January 2006.

Residents said the most important problem facing Connecticut are:
• Taxes — 29%
• Economy — 22%
• Health care — 8%
• Education — 8%
• Energy — 5%
• Transportation — 4%

News about the Quinnipiac poll and the new surplus came just as negotiations at the State Capitol were picking up steam.

Connecticut needs to address its major challenges, such as in education, health care and affordable housing. The challenge is how to do that in a responsible and affordable manner.

Gov. Rell this week suggested the improved projections would enable lawmakers to adopt her budget proposal with very little or no tax increase. The governor had proposed a $35.8 billion, two-year state budget that included a $3.4 billion, five-year education reform package and income tax increases to pay for the initiatives.

But even with the news of the week, some lawmakers still want to increase taxes to pay for much higher spending.

Budget and revenue packages approved by the Appropriations and Finance committees and supported by majority Democrats, contained in HB-7077 and SB-1390, however, would raise spending and taxes by nearly a billion dollars.

The Republican budget proposal also exceeds the state’s spending cap by putting more money into health care and education, but does it at a lower level than the other budgets. And the plan does not call for tax increases.

Connecticut taxpayers expect state government to use their tax dollars as responsibly and effectively as possible. Policy-makers need to avoid repeating the mistakes of the state’s past, when the state budget grew in good economic times only to fall to huge deficits when the economy inevitably slowed down.

CBIA encourages lawmakers to adopt a new state budget that is affordable and that avoids new taxes that could hurt Connecticut’s economy.

CBIA Action Center

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