Will Trump win spur CT to cut taxes on working families?
Nov 12, 2024
When assessing Republican Donald Trump’s presidential win last week, Gov. Ned Lamont said his fellow Democrats, nationally, lost sight of the economic woes plaguing the middle class.
But while the governor pledged to address “pocketbook issues” in the 2025 General Assembly session, which starts Jan. 8, that doesn’t necessarily mean he and the expanded Democratic majorities in the state House and Senate will be looking to cut taxes next spring.
“Democrats lost a lot of working families. We lost a lot of males,” Lamont said during a late morning Capitol press conference last Wednesday, one day after former President Trump defeated Vice President Kamala Harris. “And it ought to be a wake-up call that we ought to be fighting for the middle class and fighting for them every day. And I think they feel like we lost sight of that.”
An NBC news exit poll on Election Day found 32% of voters identified “the economy” as the issue that mattered most to them when voting for president, second only to “the state of democracy,” which was selected by 34%.
“I think it was about pocketbook issues. I think we took our eye off the ball there,” the governor said. “Those middle-class families are getting squeezed.”
But many Democrats in the General Assembly, who now control 102 out of 151 House seats and 25 out of 36 in the Senate, say the middle class is getting squeezed here because of aggressive budget controls that are limiting the amount of money they can invest in education, health care, early childhood development and other social services.
Programs have not fully realized the impact of these budget controls — dubbed “fiscal guardrails” by Lamont and other supporters — because Connecticut also has enjoyed $2.8 billion in flexible, federal pandemic aid since 2021 through the American Rescue Plan Act. These ARPA dollars could be spent, outside of budget controls, to supplant traditional state resources on most programs.
But the last of these pandemic dollars were assigned this fiscal year, and the next state budget, which Lamont and lawmakers must begin work on next February, will essentially be ARPA-free.
“There are many ways to provide tax relief,” said Senate President Pro Tem Martin M. Looney, D-Haven, and not all of them involve reducing income, sales or business tax rates.
For example, more funding for community colleges, Looney said, might stem a dangerous trend that already has left tuition this fall 11% higher than it was just two years ago.
Connecticut’s child care industry still hasn’t recovered fully from the first two years of the pandemic, and some families can’t afford to have two parents working because of the high cost of child care.
Lamont frequently touts the state tax cuts he and the legislature adopted in the 2023 and 2024 sessions, one of the largest relief packages in state history.
Ongoing measures, including the first income tax rate cut since the mid-1990s, expanded credits for the working poor, middle class and retirees and tighter limits on municipal car taxes were complemented by a 13-month-long gasoline tax holiday and a one-time, $250-per-child income tax rebate.
The governor’s budget office estimates taxpayers will save nearly $850 million this fiscal year, with middle class households trimming $300 to $400 off their income tax bill.
The legislature also expects to receive this year the second half of an ongoing analysis of the rates Connecticut pays doctors and other caregivers who treat poor patients through the Medicaid program.
Connecticut hasn’t ordered a broad-based adjustment of its Medicaid rates since 2007, and health care advocates say many Medicaid patients are insured in name only, unable to find physicians willing to treat them.
A 2019 analysis by KFF, the health care think-tank formerly known as Kaiser Family Foundation, found that Connecticut’s Medicaid rates for primary care doctors’ services ranked 22nd among all states. Connecticut ranked 30th for rates paid to obstetricians and 42nd for those covering other services.
But that doesn’t mean there isn’t any support for more tax cuts, from both Democrats and Republicans.
Progressives have been pushing hard for an ongoing, refundable income tax credit of as much as $600 per child to assist low- and middle-income families.
A refundable credit means that that even if a household earns so little it has no state tax liability to apply the credit to, it still will have $600 per child added to its refund.
Progressive policy groups like Connecticut Voices for Children and the United Way of Connecticut have advocated strongly for a refundable child tax credit.
But they also have raised concerns about the need to invest more in core programs, particularly education, health care, affordable housing and early childhood development.
It’s not a choice of cutting taxes or investing in programs, said Emily Byrne, executive director of Connecticut Voices. Tax cuts for working families that were paid for through cuts to core services still would create problems.
“The most important piece of our comprehensive legislative agenda is that the resourcing of our policy priorities isn’t on the backs of low- and middle-income residents,” Byrne said. “Eradicating child poverty and advancing family economic security necessitates brave policymakers to pass bold policies, inclusive of how these policies are funded.”
Trump already has indicated a willingness to reduce the top federal income tax rate on capital gains from 20% to 15% and Byrne said “The wealthy and corporate interests will likely see massive tax breaks” under the Trump administration.
Connecticut Voices and other progressive groups have advocated financing relief for the poor and middle class by boosting state income tax rates on the states’ richest households. But Lamont, other moderate Democrats, and Republican lawmakers have opposed any tax hikes on the wealthy, arguing it would prompt them to flee the state.
House Speaker Matt Ritter, D-Hartford, predicted the child tax credit would enjoy support. But with federal pandemic aid gone, Lamont opposed to taxing the wealthy, and many advocating to boost spending on core programs, there’s lots of competition for limited resources.
“We’ll look at it for sure,” Ritter said of a state child tax credit. “People will have to make decisions.”
Republican legislative leaders said it would be a mistake if their Democratic counterparts don’t prioritize state tax cuts, given the results of the presidential election.
Senate Minority Leader Stephen Harding, R-Brookfield, said inflation and high electric rates ensure Connecticut’s middle class continues to struggle and predicted his caucus is ready to back further relief.
“I think all of us would support an effort to reduce [state] taxes,” he said.
House Minority Leader Vincent J. Candelora, R-North Branford, would like the legislature to bolster a $300 state income tax credit that offsets a portion of households’ municipal property tax bills. That credit had been as high as $500 prior to 2011.
Candelora added that budget controls have helped government build a $4.1 billion rainy day fund and make about $8.5 billion in supplemental payments against pension debt —both of which help taxpayers over the long haul.
But when it comes to short-term benefits, “these guardrails have really only benefitted government,” he added, “and we’ve got to have that conversation on how we push those benefits down to the middle class.”