Senator Frantz Addresses Concerns Over Extending “Temporary” Taxes [Connecticut Post]

January 28, 2013

Article as it appeared in the Connecticut Post on January 27, 2013

Sun won’t set on “temporary” state taxes

By Bill Cummings

HARTFORD — Gov. Dannel P. Malloy is engaged in some verbal gymnastics over the definition of a tax increase and whether millions in levies now set to expire will go away.

When asked Friday if extending taxes scheduled to expire this year amounts to a tax increase, Malloy said it would not. The governor has said taxes will not be raised to plug gaping holes in the state budget.

“I would not consider continuing existing taxes as raising taxes,” Malloy told reporters during a news conference.

“I was asked a question whether I considered keeping current taxes, raising taxes,” Malloy said. “The mere fact that current taxes was included in the question means that no, I don’t.”

If the governor remains true to his definition of what’s not a tax increase, keeping expiring taxes in place could retain $161 million in revenue at a time when the General Assembly and Malloy are grappling with a $64.4 million deficit this fiscal year and a projected $1.2 billion deficit for the 2014 fiscal year.

Sen. L. Scott Frantz, R-Greenwich, ranking member of the tax-writing Finance Committee, said that when a tax is supposed to be temporary, there is an agreement that the state should honor.

“If it doesn’t go away, if it doesn’t sunset, it’s essentially a tax increase,” he said.

An electrical generation tax charged to companies that produce power, such as the Millstone nuclear plants in Waterford and electrical generating plants in Bridgeport and Stamford, is set to expire June 30.

The tax, which brings in about $71 million a year, could slightly reduce rates if it allowed to expire.

Another expiring tax is a 20 percent surcharge on corporations making more than $100 million a year, which is set to sunset Dec. 31. The tax is projected to generate $70 million this fiscal year. A credit limitation on the insurance premiums tax expired last month and revenue is estimated at $19 million this year.

All three taxes were enacted two years ago as part of a deal to close a $3.7 billion deficit Malloy inherited in the state’s $40 billion budget. The taxes were intended to be temporary.

Some Democratic leaders have already said they favor keeping the taxes in place. Calls to several GOP leaders were not returned Friday.

Ken Holt, a spokesman for the Millstone plants, said extending the generation tax amounts to breaking a promise. He said the tax costs Millstone about $42 million a year and that cost is passed on to ratepayers.

“Whatever the semantics of what you call something, a promise is a promise. If that tax does not expire, the promise has been broken. It raises electric rates for people who now pay the highest rates in the continental U.S.,” Holt said.

Malloy stopped short of saying he will support keeping the taxes, saying his proposed budget is now being put together.

The governor will release a new spending plan before his Feb. 6 State of the State speech.

“We don’t have a budget now, and it will be done before Feb. 6, and all questions will be answered in that budget,” Malloy said. “We have a spending cap issue and a revenue issue. These two things will drive creation of the budget.”