Malloy may extend taxes set to expire [Rep-Am]

November 19, 2014


HARTFORD – Gov. Malloy is leaving open the possibility of extending taxes that are set to expire, including a 20 percent surcharge on corporation tax.

Top Republican lawmakers are charging Malloy is hedging on his campaign promise not to raise taxes again after he signed record tax increases in 2011. The governor’s office is disputing the political accusation.

Malloy appeared to qualify his pledge when questioned about his intentions on taxes after the State Bond Commission’s meeting this morning.

The governor and the legislature will be adopting a new two-year budget for 2016 and 2017 next year. The budget plan will have to close projected shortfalls of $2.1 billion or $2.7 billion, depending on the latest estimates from the legislature and the governor’s office.

The Democratic governor acknowledged today that Democrats in the legislature may propose additional taxes to balance the 2016 and 2017 budgets

Malloy was asked if he would sign a budget plan that requires taxpayers pay more taxes.

“I know what I want to do. There may be members of the legislature that want to do other things,” he said. “We’ll cross those bridges when we come to them, but I have been pretty clear about my expectation, and that is, with respect to new taxes, that there not be any new taxes.”

Earlier, Malloy commented on the possibility of having to postpone scheduled tax cuts, including the 20 percent surcharge on the corporation tax that is due to expire after the 2015 tax year, sales tax exemptions for clothing, footwear and over-the-counter drugs, a 50 percent deduction for teachers pensions on the state income tax.

“I can only tell you that we are in the very early stages of a developing next year’s budget, and we’re not intending to raise taxes. With respect to the surcharge, I have not taken a position. With respect to other things, I think will be able to accommodate those, and we’ll begin the process of implementing other steps as well,” Malloy said.

Benjamin Barnes, the state budget director, told reporters later that he will present options to Malloy that could include continuing the surcharge on the corporation tax and other taxes that are due to expire.

“Will I give him alternatives that involve adjusting the expiration dates of taxes? Of course,” he said. “I’ll give him all kinds of alternatives. Many of which will be deemed unpalatable or ill-advised for one for reason or another, and we’ll come up with a budget that he supports, and that we can hopefully gain support from the General Assembly. Of course, I’ll present that as an option to him because that is my job to give him a wide variety of options to solve the budget problems we face.”

Sen. L. Scott Frantz, R-Greenwich, the ranking Senate Republican on the Finance, Revenue and Bonding Committee, listened to the governor’s remarks to reporters after the bond commission meeting.

He said he heard Malloy backpedaling on his no-more-taxes pledge from the 2014 campaign.

“To me, that sounds a little bit like a hedge,” Frantz said.

He said Malloy couched his answers rather than forcefully take additional taxes off the table.

“I think realistically he is open to just about everything because this is a real fiscal catastrophe,” Frantz said.

Republicans highlighted how State Treasurer Denise Nappier just reported her office dipped into bond proceeds to cover daily operating costs because the state’s cash pool is running sort.

“If you have to turn to borrowing to pay your daily expenses, it is a problem, and I know there is a spike in revenues and there are valleys in revenues to the state of Connecticut, but if you’re talking about not having enough cash to get through those valleys, you’ve got a real problem on your hands and something is wrong,” Frantz said.

The treasurer’s office has made temporary transfers of $160 million to support the state’s cash needs, and it anticipates more will be required until the cash flow is sufficient to cover costs.

This report comes on the heels of news that this year’s budget is running a shortfall of nearly $100 million and updated budget outlooks that project ten-digit deficits for the next three years.

The Malloy administration will be announcing a round of spending cuts intended to help bridge this year’s budget gap.

Additionally, Malloy acknowledged pushing through a self-imposed bonding cap of $1.8 billion with the approval today of $267 million in general obligation bonds.

“We’re seeing that the state is running out of cash. We are seeing excessive borrowing. The governor violated his own self-imposed bonding cap, so naturally people are now going to look to tax increases, and I think it is not something that the state of Connecticut can afford to take,” said Rep. Vincent Candelora, R-North Branford, a deputy minority leader.

He said he suspects Malloy may leave it to the legislature to propose more taxes.

He said the governor and majority Democrats have not shown an appetite for cutting spending.

“It would not surprise me if we are going to see, whether it comes out of the governor’s office, or the Democratic legislature, tax increase proposals, but at the end of the day that is direction that they seem to be pointing,” Candelora said.