Legislators will open the session’s final week Monday expected to pass a new state budget that keeps income tax rates flat, expands the sales tax and raises levies on prepared foods, e-cigarettes, plastic bags, alcoholic beverages and the sale of expensive houses.The tentative agreement between Gov. Ned Lamont and leaders of the Democratic majority boosts funding for education grants and nursing homes, expands Medicaid eligibility for working poor adults with children and settles a longstanding funding dispute with Connecticut’s hospitals. It also refinances future contributions to pension funds for teachers and state employees, shifting billions of dollars in costs — plus interest — onto taxpayers after 2032.The new budget would close projected deficits totaling more than $3 billion over the next two fiscal years combined. It also would establish the largest budget reserve in state history, a $2 billion cushion against the next recession.“We have a very different legislature than we had two years ago, we have a new governor and we had to balance a lot of concerns,” Rep. Jason Rojas, D-East Hartford, said of a revenue package that involved lots of compromise.Keeping income tax rates flatOne of those concerns came from the governor. After raising state income tax rates in 2009, 2011 and 2015, Connecticut’s economy could not absorb another increase in its largest tax to avert the latest budget deficit forecast, he said.
But while Lamont and some of the new Democratic lawmakers from Fairfield County strongly opposed any increase in income tax rates — including those aimed only at wealthy households — a growing progressive element within the party pressed hard for the rich to pay more.“There’s never been better public support,” for a capital gains surcharge on the wealthy, said Rep. Anne Hughes, D-Easton, co-chairwoman of the House Democratic Progressive Caucus. Midi drum pad software. “There’s never been a better appetite to actually use capital gains revenue to pay down some of the debt liability or fully fund education.”. “That’s something we have to respect,” Rojas said.
“They’re here, they’re active, they’re vocal, and the debate isn’t over.”Well, it’s over for the next three days, but Rojas’ point was that the discussion would continue in sessions to come.Hughes agreed.“Leadership is totally owning that,” she said. “Are we disappointed? Absolutely.”One of the key reasons for that debate involves tens of billions of dollars of unfunded pension liabilities Connecticut amassed over a 70-year period.
.With a budget deal headed to his desk for a signature Gov. Ned Lamont is quick to point out it won’t increase income or sales tax rates, or reduce aid to cities and towns.But a series of tax increases and expansions in other areas, as well as postponed tax cuts and credits total about $340 million. The new taxes and fees amount to less than $180 million in a $21 billion budget. Here’s where you’ll notice those hikes:The sales tax on digital downloads — things like e-books and movies downloaded from Amazon — will increase from 1 percent to 6.35 percent, bringing in $27.5 million in the first year and $37.1 million in the second.Prepared foods such as restaurant meals will be subject to a 1 percent tax, generating $48.3 million for the state in the first year of the biennial budget and $65.8 million in the second year.The sales tax will be expanded to include parking, dry-cleaning and laundry services, and interior design services. That’s far less than Lamont had hoped for. He’d originally proposed expanding the sales tax to all services.
The sales tax expansion will generate an additional $11.8 million in the first year and $24.4 million in the second year.The budget will also lower the threshold to collect online retail sales tax — out-of-state sellers are considered a retailer for Connecticut sales and use tax purposes after 200 or more retail sales and $250,000 in gross receipts in a 12-month period. The change lowers the threshold in gross receipts to $100,000. The change is expected grow online sales tax receipts by $1.5 million in the first year and $2 million in the second.The largest single increase is a reduction in a tax credit available to partnerships and small corporations, netting the state about $50 million. The tax credit was created in 2018 after all “pass-through” companies — those that pass profits to their owners rather than pay corporate taxes — were charged 6.99 percent on profits, and their owners were exempted from the state income tax.
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All of these business owners save on federal taxes in the switch, and the new budget removes about one-quarter of that savings by reducing the income tax credit.A mandated occupancy tax on short-term rentals operated through online platforms such as Airbnb is expected to generate $1.5 million in the first year and $2 million in the second year of the budget.In 2020, homeowners moving out of state and selling their house for more than $2.5 million will pay a new mansion tax, which increases the conveyance rate to 2.25 percent on those real estate sales.
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The Morrison government has bet the house to win the 2019 election, offering tax cuts on top of tax cuts for low- and middle-income earners and cutting one wide-ranging tax bracket.Treasurer Josh Frydenberg’s not only proposed doubling the low- and middle-income tax offset, but in 2024 will lower the 32.5 cents tax bracket to 30 cents, which the government claims will capture 94 per cent of all Australian workers.While the dollar figures being thrown around may seem enticing to voters, it’s all contingent on the outcome of – and even the election after that. The Coalition had initially aimed to push the changes through as early as Wednesday, with Labor seeming likely to vote at least for the doubling of the tax offset.That would have meant taxpayers could have had the benefit of the offset when they lodged their tax returns this year.Mr Frydenberg threw a spanner in the works on Tuesday afternoon, saying the Coalition did not trust Labor to pass the tax cuts package, and would hold back the legislation until after the election, effectively making the federal election a referendum on which party represented the best tax relief.
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