The devil’s always in the details, but at first blush Republican Gov. M. Jodi Rell’s latest budget offer, unveiled earlier today, is a savvy political move. Rather than appearing to buckle under to Democrats’ demands, she offers some movement on the income tax side but also introduces some tax cuts for her high income Republican base and for middle and lower income residents.
Rell accepts income tax increases on higher earners – individuals making over $500,000 and couples earning $1 million or more. She does not go as far as the legislature’s Democratic-majority, but the move should stifle some of the criticism that Rell is trying to protect the state’s wealthy at the expense of the middle and lower-classes.
She is also putting a sales tax cut on the table, reducing it from 6 percent to 5.5 percent. It’s not huge but just the word “tax cut” earns a Pavlovian response from some during tough economic times.
The Governor knows Republican lawmakers, particularly those in lower Fairfield County where much of the state’s money is, are not going to be eager to vote on a budget that hikes constituents’ income taxes. So her plan also eliminates the “death tax” on estates worth over $2 million that those GOP legislators promise every election cycle to fight to abolish. Now they’ve got a bit of cover for supporting tax increases.
Of course, with the state $8.55 billion in the hole one could question the logic of reducing revenues even further by decreasing taxes.
Rep. John Hetherington, R-New Canaan, said his initial reaction to Rell’s newest budget “is really pretty positive.”
“I’m sorry to see she’s proposed increasing the income tax but you know we have to deal with realities and probably at this time we do need some additional revenues and I guess that’s as good a way to go as any,” Hetherington said.
He also argued the sales and death tax cuts will boost the state’s economy.
Sen. Bob Duff, D-Norwalk, who has opposed his party’s previous budgets in part because of their income tax hikes, found Rell’s latest offer “shocking.” He said he thought the income tax was a “non-starter” for the Governor.
But Duff also admitted Rell’s proposal is at first glance an appealing one. He too agrees with eliminating the estate tax and said a sales tax cut could prove beneficial and possibly even create jobs.
“The budget that we would vote on will not be the entire Rell plan but it may be something close,” Duff said. “She’s got something in there for everybody.”
But Rep. Livvy Floren, R-Greenwich, said although she would love to see the death tax abolished, she does not see a resulting income tax hike as an even trade.
“I don’t understand why she doesn’t jump on board with the budget given to her on a silver platter – the Republican ‘no tax increase’ budget,” Floren said.
Floren said she is also of the opinion that now is not the time to lower taxes on consumption i.e. the sales tax and referred to a recent article in the Wall Street Journal on the topic.
House Minority Leader Lawrence Cafero, R-Norwalk, said Rell had “guts” for offering the tax hike compromise even as he indicated his opposition to higher income taxes.
“My concerns with her proposal is overall it raises too much taxes and I’ve never been a proponent of the ‘millionaires’ tax’ to begin with,” he said.
Cafero said the spotlight is now on legislative Democrats.
“They can characterize her move as anything they want – a cave, a compromise, giving in, a blink,” Cafero said. “All I know is it took guts on her part. It changed the dialogue. Now it’s their turn.”
