State Rep. Jonathan Steinberg, (D-136) was one of 65 House Democrats who supports raising the top income tax bracket rate to 7 percent. That’s beyond the one Gov. Dannel P. Malloy’s proposed.
“I don’t think there is any realistic prospect of balancing the budget without a tax increase,” Steinberg said.
Despite the letter, Malloy would only go as high as 6.7 percent, up from his original 6.5 percent. The Democrats the budget last week. State officials say the deal would be the earliest budget ever adopted by the state.
Currently, the proposed budget includes $1.5 billion in tax increase. The revenue would come from a myriad of sources, including replacing the current $500 property tax credit with a $300 property tax credit. The governor’s budget also calls for a hike in the state sales tax from 6 percent to 6.35 percent.
Some economists said the state could raise at least $270 million if the sales tax rises. However, that’s speculative and raising it even slightly could hurt business.
That’s not prudent in this economy, Steinberg said. Too many small businesses would be hurt by the sales tax, as would the middle class.
In that, Republicans and Democrats agree.
Many people shop in Connecticut because it has a lower sales tax, said state Sen. Toni Boucher, a Republican who represents Bethel, New Canaan, Redding, Ridgefield, Weston Wilton, and Westport in the 26th Senate District. The border towns, such as Greenwich and Danbury could see business drop if the sales tax rises.
And though some might think so, this proposal isn’t intended to “soak the rich”, Steinberg said.
“It’s our way of saying we’ve got the governor’s back,” Steinberg said.
In an April 11 letter to House Speaker Chris Donovan, Steinberg and his colleagues said they “believe a more progressive income tax structure should be part of any revenue package included in our budget. We strongly believe that the upper income brackets in the Governor’s proposal did not go far enough and that our highest rate should go above the .2 percent increase proposed to at least .5 percent.”
According to the Office of Fiscal Analysis, the governor’s proposed income tax changes would increase taxes on families earing $60,000 a year by 38.5 percent compared with 10.4 percent on families earning over $2 million a year.
“These numbers need to be changes, so that the “shared sacrifice” is fair sacrifice,” according to the Democrats’ letter.
Bob Zappi, Chairman of the Westport Republican Town Committee, isn’t convinced.
“This is punitive to Westporters as many are entrepreneurs and business income is taxed at this high personal rate,” Zappi said. “Typically, lawmakers representing New Haven, Hartford and Bridgeport, controlled by the Democrat speaker, propose these types of tax increases. Imagine our surprise when we saw Westport's very own Rep. Steinberg had signed!”
Moreover, the letter to Donovan was written the same day that it was reported Connecticut lost 6,000 more jobs, Zappi said.
And, Zappi said, “unlike most other states, Connecticut’s income tax is based on Federal AGI, not Federal taxable income, so our effective rate is much higher to start with.”
Malloy has promised spending cuts as well as tax hikes to make up the $3.5 billion state deficit. He is seeking $1 billion in concessions from state employees, but there is no guarantee he’ll be successful.
No matter what, the freshman representative said the budget process is replete with stark choices.
“It seems to me somewhat more reasonable to ask those who are doing a bit better in this economy to shoulder a bit more of the burden,” Steinberg said. “I don’t have a lot of sympathy for people making over $1 million a year. They’re the ones who could better deal with incrementally greater contribution.”