Budget negotiations ongoing; spending level a big concern

(June 1, 2007) Democrats in the House and Senate approved a tax package this week that was quickly vetoed by Gov. Rell, primarily because it included a $730 million tax increase at a time when the state is expecting an $850 million budget surplus this fiscal year and has a Rainy Day Fund of $1 billion.

With the passage and veto of the Democrats' tax package, a budget-and-spending plan will be negotiated with the administration. The legislature is set to adjourn at midnight on Wednesday, June 6.

It's hoped that the budget negotiations will include serious efforts to rein in spending and tax increases. The Appropriations Committee-approved budget calls for a 10.4% increase in spending, approximately $850 million over the state's spending cap -- the highest increase in spending since the cap's inception.

Each of the different spending plans proposed this year exceed the state's spending cap for the next fiscal year, some of which are designed to provide municipalities with greater property tax relief.

While lawmakers do need to address such key priorities this year as education, health care and housing, they should do that in a responsible, affordable manner. The state's spending cap this year allows an increase in state spending of 3.1%.

Connecticut taxpayers are very concerned about taxes and the economy, as reflected in a recent statewide poll. And the spending cap was overwhelmingly approved by voters specifically to hold lawmakers accountable to spending within taxpayers' ability to pay.

Tax increases in the Democrat's plan were also highly problematic. Among other things, the tax package called for a 30% increase in the top rate for joint incomes over $500,000 to pay for a 5% reduction in the rate for incomes under $100,000.

But that tax increase directly targeted small business owners and entrepreneurs who pay tax on the income of their businesses through the personal income tax.Ironically, those are the same small businesses lawmakers and others are hoping to lead the way on job creation in Connecticut.

The Democrats' tax package also decreased from 70% to 60% the total value of tax credits a business can take in one income year. It's difficult to understand why lawmakers would want to limit the ability of businesses in Connecticut to increasing research and development efforts and other methods for growing the economy.

Connecticut taxpayers expect state government to use their tax dollars as responsibly and effectively as possible. As the 2007 session comes to a close, CBIA urges policy-makers to approve a state budget that will address priority needs — and help our economy grow and create more jobs.

For more information, contact CBIA's Bonnie Stewart at 860-244-1925 or stewartb@cbia.com.

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