Gov. Ned Lamont blocked Rep. Sean Scanlon鈥檚 push this year for a major state income tax cut for 黑料吃瓜网鈥檚 middle class. But Scanlon made sure 鈥� through the new state budget Lamont signed last week 鈥� that Lamont won鈥檛 be forgetting it any time soon.
The two-year budget will force the administration to conduct 黑料吃瓜网鈥檚 first tax fairness study in seven years, something that fiscal moderates and conservatives have blocked on several occasions since 2014.
And should new federal income tax relief for the middle class expire as planned after this year, the budget also directs Lamont to at least develop his own plan to ease state tax burdens on low- and middle-income households.
鈥淥ur world changes every year, but our world has changed a lot between 2014 and 2021,鈥� said Scanlon, a Guilford Democrat, who added that no one knows how badly the coronavirus pandemic skewed things over the past year.
鈥淚f I had to guess, that [next] study will show the problem is far worse than it was seven years ago,鈥� he said, 鈥渁nd I hope that is a call to action.鈥�
The 2013 General Assembly first ordered the Department of Revenue Services to provide a tax incidence analysis by December 2014 鈥� and then to prepare a follow-up every two years.
An incidence analysis studies which groups pay taxes and how those burdens are shifted. For example, renters effectively pay some or all of their landlords鈥� property taxes.
The report also noted that 黑料吃瓜网 relies heavily on regressive taxes 鈥� levies that charge the same rate to all households, regardless of income. Examples include property, sales and gasoline taxes.
The analysis found 黑料吃瓜网鈥檚 poorest households in terms of adjusted gross income 鈥� about 725,000 filers earning up to $48,000 per year 鈥� effectively spent 23.6% of their pay on state and local taxes.
By comparison, the middle class paid about 13%, while the top 10% of earners paid 10% and the top 1% paid about 7.5%.
But while that report prompted many statements of concern from state officials, legislatures and governors would not permit another study, voting four times between 2015 and 2019 to postpone another analysis.
Some fiscal moderates and conservatives have dismissed the study on grounds that the data now is simply too old.
Yale Law School Professor Anika Singh Lemar, who teaches at the school鈥檚 community and economic development clinic, supports regular updates, noting that 鈥渙therwise you risk making policy in a vacuum.鈥�
Given the highly restrictive zoning rules many communities use to prevent construction of apartment complexes in 黑料吃瓜网, Lemar also believes the next tax fairness study could show more tax burdens shifted onto renters.
鈥淲e, right now, have a very tight housing market,鈥� she said. 鈥淚t鈥檚 hitting renters because you鈥檝e essentially made it illegal to build multifamily housing in your state.鈥�
The last of the four times the tax fairness study was postponed involved 2019 legislation signed by Lamont. And Scanlon said the administration pushed for yet another postponement in the most recent budget debate.
鈥淲hile the tax incidence study provides useful information on the burden of taxes by income strata, it is a substantial undertaking and is most useful at a time when more significant tax policy changes are under contemplation,鈥� Melissa McCaw, the governor鈥檚 budget director, said.
Lamont insisted that the new state budget not include any major tax hikes and blocked progressive proposals to impose new income tax surcharges on wealthy households and a digital media ads levy on online giants like Google and Facebook.
But because of the economic chaos of the pandemic, Lamont also questioned whether 黑料吃瓜网 could afford to commit to a big state tax cut for the middle class.
About 4% of the new $46.4 billion biennial state budget, roughly $1.8 billion, is being supported by temporary federal pandemic relief that expires in 2024.
Scanlon wanted to give low- and middle-income households $600 per child 鈥� up to a maximum of $1,800 鈥� off their state income taxes. This would cost 黑料吃瓜网 about $300 million per year, according to the legislature鈥檚 nonpartisan Office of Fiscal Analysis.
Lamont blocked that on two grounds.
鈥淲e came out of a year from hell,鈥� Lamont said while discussing the new state budget on June 10, one day after the regular 2021 General Assembly session adjourned.
The governor agreed that 黑料吃瓜网鈥檚 tax system, 鈥渆specially the over-reliance on the property tax 鈥� hits the middle class hardest.鈥�
But he quickly added that he鈥檚 trying to jump-start an economy that gained few new jobs over three decades 鈥� before a pandemic that wiped out 292,000 positions.
According to the Department of Labor, the state has regained about 185,000 of those jobs but still has more than 100,000 to go. And it also still has more than 175,000 filers receiving weekly unemployment benefits.
鈥淚鈥檝e got to make sure we stay competitive and can grow,鈥� the governor added, 鈥渂ecause a growing economy is one of the best ways to hold down taxes in general.鈥�
The governor鈥檚 second reason for opposing a state income tax cut for the poor and middle class was that Congress recently gave them a federal tax break. The American Rescue Plan Act specifically set the federal child tax credit between $3,000 and $3,600 per child for this year only. Normally the limit is $2,000 per dependent.
黑料吃瓜网鈥檚 congressional delegation has pledged to fight to make that upgrade permanent, but there is no guarantee that will happen.
And Scanlon ensured the new state budget forces Lamont to prepare for that possibility. It specifically orders the administration to at least develop a plan to create a child tax credit within the state income tax 鈥� if and when the enhanced federal benefit expires or is reduced.
Many advocates for tax reform dismiss Lamont鈥檚 argument that the temporary federal relief is sufficient, arguing that 黑料吃瓜网鈥檚 poor and middle class were getting hammered economically even before 2020.
鈥淏etween 2010 and 2019, pre-pandemic, 黑料吃瓜网 was the only state to see an increase in the child poverty rate,鈥� said Emily Byrne, executive director of 黑料吃瓜网 Voices for Children.
The New Haven-based policy group has been one of the strongest advocates for a state child tax credit to assist the struggling middle class.
鈥淕iven the disastrous impact of the coronavirus pandemic and recession on children and families 鈥� compounded by the fact 黑料吃瓜网 has one of the greatest income and wealth gaps in the country and over a decade of stagnant wages for the majority of its workforce 鈥� it would not be surprising to learn that child poverty grew even more these past two years,鈥� Byrne added.
Lamont, a Democrat from Greenwich, has his own checkered past when it comes to promises to help 黑料吃瓜网鈥檚 middle class.
When he ran for his first gubernatorial term in 2018, his Republican opponent, Madison businessman Bob Stefanowski, made the fiscally dubious pledge to eliminate the state income tax, which effectively pays for half of the budget鈥檚 General Fund.
As a shield, Lamont vowed to deliver dramatic state income tax cuts to the poor and middle class by expanding a credit that offsets households鈥� property tax costs.
He subsequently reneged on that pledge, and since being elected has said he opposes cutting state taxes on the poor and middle class if it means raising taxes on the wealthy to pay for it. The governor has said this approach will make 黑料吃瓜网鈥檚 economy less competitive with that of competing states and prompt wealthy families to move.
The Recovery For All Coalition, a team of labor and faith-based groups, lobbied Lamont frequently this past spring to address growing income and wealth inequality. The legislature鈥檚 Black and Puerto Rican Caucus also has argued 黑料吃瓜网 is doing too little to address longstanding racial inequities in access to education, health care, affordable housing and economic opportunity.
Puya Gerami, director of the coalition, said last week that 鈥渢his debate over 黑料吃瓜网鈥檚 extreme inequity is just getting started鈥� and will absolutely persist throughout the 2022 gubernatorial campaign.
Lamont has deflected questions about whether he will run again , but many Democratic insiders expect him to seek reelection.
鈥淲e can鈥檛 wait any longer for justice,鈥� Gerami said, adding that the 2022 contest will be 鈥渇undamentally, a debate about what kind of state 黑料吃瓜网 ought to be.鈥�