Boucher Seeks to Protect All Pensions and Business Community from Tax Burdens

April 1, 2014

Hartford, CT – Senator Toni Boucher (R-Wilton) member of the Finance, Revenue and Bonding Committee voted against a proposed bill by the Governor to spend $155 million in surplus money toward a $55 dollar rebate to taxpayers.

“People laugh at this proposal. They see this as an election year gimmick,” said Sen. Boucher.

The rebate is supposed to reward voters who paid on average $700 in increased taxes when Governor Malloy passed the largest tax increase in our state’s history. Some reports suggest given recent cuts in tax reimbursements to hospitals, Malloy’s 2011 tax hike was close to $1.8 billion.

The projected budget surplus is estimated at $500 million dollars. If this surplus is real and not just based on borrowed money that was not used, Sen. Boucher would like to see the state do a combination of things. First, to pay down debt and second to give taxpayers and businesses significant long lasting tax breaks.

In an effort to support taxpayers Boucher offered two amendments to the bill before her committee. The first would take a portion of any surplus that is realized and put it toward helping small businesses with special assessments on unemployment compensation.

Connecticut still owes more than $573,439,548.60 to the federal government to pay for unemployment liabilities. For the third year in a row businesses received the letter they dread from the Connecticut Department of Labor, that unexpected “special assessments” are due.

These assessments are basically a hidden tax on businesses. The money collected helps pay tens of millions of dollars in interest Connecticut owes to the federal government. In addition to interest costs, Connecticut and other states with federal loans outstanding for two consecutive years must make additional payments into the Federal Unemployment Tax Act (FUTA) system to pay down the loan principal. This year the FUTA tax rate will increase by 0.9%.

“Many employers are paying as much as $42 more per employee in unemployment compensation fund taxes because the state had to borrow from the federal government. For the third year in a row these small businesses are paying a penalty because the state did not budget properly,” said Sen. Boucher. “If we ease the burden on these businesses maybe they will have some flexibility to hire additional workers.”

Another amendment that Sen. Boucher proposed to the bill, would require a tax exemption on 25 percent of the income received from any public or private pension or retirement system, including Social Security, going back to January 1, 2014. Governor Malloy had proposed a 25 percent exemption for retired teachers’ pensions only. The Governor’s proposal is estimated to cost the state $23.7 million per year.

“The controversial tax exemption for teacher’s pensions has many retirees seeing red,” said Senator Boucher. “Everyone I have spoken to knows that what Connecticut needs is real tax reform, not an election year proposal that picks winners and losers and which taxes some pensions and not others. It is widely acknowledged by the people of Connecticut but not enough in the legislature or the Governor’s office, that Connecticut’s high taxes are driving people and jobs out of state. It is reported that Connecticut is the worst state to retire in. Why? Because retirees have to bear the costs of high income, inheritance, gift, real estate and pension taxes. This burden does fall not just on retired teachers, but on custodians, accountants, doctors, nurses, builders, realtors and other retirees. Connecticut is one of the few states taxes pensions.”

Senator Boucher added, “When this special tax exemption on pensions was only given to retired teachers there was an angry outcry from people who asked, ‘why not me? What about the rest of us? Are we not as important to the state?’ They have concluded that this exemption is simply not equitable. If this tax exemption will in theory, make Connecticut more competitive among states for people to retire in, then it should be enacted for all retirees.”

The amendment did not make it out of committee, but efforts to promote real tax reform will continue as these bills are debated on the floor of the House and Senate.