$900 Million State Tax Windfall a ‘One-Time’ Event
The amount of state income taxes Connecticut collected in December and January will exceed expectations by more than $900 million.
And while that is good news to Connecticut taxpayers, it must be taken with a grain of salt.
That’s because the collections include one-time payments based on repatriation of foreign profits in advance of a Dec. 31, 2017 federal deadline.
They also include advanced payments usually received later in the year that were made to avoid the new federal cap on state and local tax deductions that went into effect January 1.
In other words, much of the $900 million represents a one-shot deal: A singular event that will not recur next fiscal year.
So while the influx of any revenue is welcome to Connecticut, this is not something lawmakers should count on year after year.
It's important not to confuse bubbles with trends. All of it—all of it—is one-time.
"All of it—all of it—is one-time."
In addition, the bipartisan budget lawmakers approved last year includes a volatility cap that requires any quarterly income tax revenue exceeding $3.15 billion be placed in the state's rainy day fund.
That means that only $10 million of the $900 million can be applied to a projected $224 million deficit for this fiscal year.
Malloy, who was critical of the bipartisan budget that lawmakers assembled without his input, praised the volatility cap because he said it sets aside funds "to meet future needs in a responsible way."
In recent years, Connecticut collected about $750 million in December and January combined, and well over $1 billion in April.
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