Good news is hard to find when it comes to taxes in Connecticut, but there is something positive to report. Tax receipts for the current fiscal year apparently are continuing to come in higher than budgeted, and projections for how much the state’s current tax structure will bring in next year have been adjusted upward.

Revenues for the current year are more than $600 million above the amount projected at the time the budget was passed. And although official reports have not been released as of the time of this writing, word at the state Capitol is that budget analysts are now projecting that tax receipts for the 2012 fiscal year will register $175 million higher than originally estimated.

Much of the improvement is in personal income tax and sales tax receipts. Connecticut’s personal income tax structure is heavily weighted toward upper incomes, so as financial markets improve our tax collections rise.

Plus, our economy is making a painfully slow but steady recovery, which helps both income tax as well as sales tax receipts, as consumers and businesses make purchases and investments.

Reduce tax increases

The tax package is currently before the Finance, Revenue & Bonding Committee, which should use these new revenue projections to scale back the size and scope of the tax increases.

Because a sustained economic recovery is the best way for Connecticut to solve its fiscal problems, the committee should jettison those proposed increases that will most hinder economic growth.

CBIA believes that tax increases should only be used as a last resort after all possible means of reducing spending are exhausted, and that tax increases that would slow our recovery should be avoided.

Governor revises proposal

In other tax news, Gov. Malloy announced that he is revising his tax plan by reinserting the property tax credit originally targeted for elimination. Under existing law, a credit of up to $500 can be taken off the personal income tax for property taxes paid on a primary residence.

The governor is proposing to reduce the amount of the credit to a maximum of $300. He plans to pay for the most of the reinsertion of the credit by adjusting the new income tax brackets he has proposed. 

The Finance Committee deadline is April 27, but it is expected that the committee will vote on the tax package sometime next week.

For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 or bonnie.stewart@cbia.com.