Income tax revenue collapses; Malloy says taxing the rich doesn’t work

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HARTFORD, Conn. (WTNH)–Connecticut’s state budget woes are compounding with collections from the state income tax collapsing, despite two high-end tax hikes in the past six years.  

It means the current budget year, which ends in just two months, is now seriously in the red and next year’s deficit has ballooned to $2.2 billion.    

It’s happening because the state of Connecticut depends too much on its wealthy residents, and wealthy residents are leaving, and the ones that are staying are making less, or are not taking their profits from the stock market until they see what happens in Washington.

It’s been ten full days since the April 18th tax filing deadline, and workers at the state tax department are still processing returns coming in the mail.  Even though about 90 percent of all Connecticut residents file electronically, many still send their checks for taxes due in the regular mail. It now looks like expected revenue from the final Income filing will be a whopping $450 million less than had been expected.

“Next year it looks like our first year budget, fiscal ’18, now instead of having a $1.7 billion deficit to address, it’s now about $2.2 billion,” said Senate President Pro tem Martin Looney (D-New Haven).  And it has a major impact on the current budget year that ends in just two months.  

Appropriations Committee Co-Chair Sen. Paul Formica (R-Niantic) added, “The double whammy is that the numbers presented today are numbers that are going to have to be dealt with this fiscal year, that’s what the revenue impact is for this fiscal year ending June 30th.”

The state only has $235 million in the so-called ‘Rainy Day Fund’ for emergencies.  That means the Governor and the legislature will have to find $215 million in the next few weeks just to balance the books on the current year.

Some of it is because some wealthy people have moved out and others are sitting on their stock market gains waiting to see what President Trump does.

State Revenue Services Commissioner Kevin Sullivan said, “The hedge funds industry, upon which we rely very heavily, is much more conservative in the last year in terms of the incomes that people are realizing (and) no bonuses again on Wall Street.”  

Governor Malloy added,  “The reality is that in Connecticut we get most of our money from very few people and that can produce some very wild swings.”

The Governor is calling for an immediate hiring freeze and review of all current spending and will meet with legislative leaders from both political parties in a sort of first round budget summit early next week.

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