Hopes for a bipartisan, election-year vote on a revenue package dissolved with the unveiling of the proposal in the Finance Committee Wednesday, with Republicans and a handful of Democrats voicing concern about the state’s revenue cap and the state’s long-term fiscal stability. Nonetheless the proposal, which includes a new child tax credit and Governor Lamont’s 2023 midterm revenue package, passed by a comfortable margin in the Democrat-controlled Committee (votes were still open as of this writing).
The revenue proposal, SB 11, makes various tax- and revenue-related changes to the adopted 2023 FY budget plan passed last session. Among other things, the bill:
- Increases the property tax credit from $200 to $300 and expands the number of taxpayers who may claim the credit for the 2022 tax year by eliminating the provision restricting its eligibility to seniors and people with dependents.
- Accelerates the phase-in of the pension and annuity income tax exemption by allowing qualifying taxpayers to deduct 100% of their eligible income beginning with the 2022 tax year (under current law, the exemption is 56% for 22, 70% for 2023, 84% for 2024, and 100% beginning in 2025).
- Establishes a personal income tax exemption for amounts received under the 2020 and 2021 Earned Income Tax Credit enhancement program.
- Expands the state’s employer student loan tax credit to include any loans issued by the Connecticut Higher Education Supplemental Loan Authority (CHESLA), rather than just CHESLA loans for refinancing student loans, and (2) authorizes qualified small businesses (i.e., those with gross receipts of $5 million or less) to apply to the DRS commissioner to exchange the credit for a refund.
- Reduces, from $1.19 billion to $994.9 million, the FY 23 transfer to the General Fund from designated American Rescue Plan Act (ARPA) funds.
- Requires the Comptroller to reserve $83.2 million of General Fund revenue received in FY 22 under ARPA for home and community-based services to be used in FY 23 for federal revenue collections.
- Allows foreign captive insurers to open a branch in Connecticut and creates an insurance premiums tax amnesty program for captive insurers that establish a branch or transfer their domicile here, among other things.
- Repeals the law requiring the Office of Policy and Management secretary to create a plan to establish a state-level child tax credit, pending certain changes to the federal child tax credit.
Finally, the Appropriations Committee is scheduled to vote on its FY 2023 adjusted spending plan tomorrow. Between then and May 4th, when the session is scheduled to adjourn, legislative leaders will endeavor to reach agreement with the administration on a final budget-tax package. We will keep you apprised of any new developments on this and other issues of interest.