Governor Ned Lamont held a news conference in East Hartford to announce that the fiscal years 2024 and 2025 biennial state budget proposal that he will present to the General Assembly later this week calls for a broad-based reduction in income tax rates for middle-class workers in Connecticut.
Article continues below
Currently, single (joint) filers pay a 3% state personal income tax on their first $10,000 ($20,000) of adjusted gross income and a 5% tax on income up to $50,000 ($100,000).
Governor Lamont is proposing to permanently lower the 5% rate to 4.5% and the 3% rate to 2% beginning with income year 2024.
This is expected to save taxpayers $440 million annually. Depending on adjusted gross income, some joint filers could receive almost $600 in income tax relief and single filers could save almost $300.
In total, about 1.1 million of the state’s 1.7 million tax filers will see some amount of relief under the plan.
If approved by the legislature, this will become Connecticut’s first income tax rate reduction since 1996 and the largest rate reduction since the income tax was implemented in 1991.
“I want to cut taxes for the middle class,†Governor Lamont said.
“When I took office four years ago, the state was operating under a $3.7 billion deficit and analysts were projecting more deficits for many years to come. For the sake of our economic growth, I made it a top priority of my administration to turn that instability around.
"Four years later, we now have a surplus that we achieved without implementing broad-based tax increases, and at the same time we’ve been making historic investments in our pension obligations while leaving the rainy day fund untouched.
"Today, Connecticut’s fiscal health is stronger than it’s been in decades. Considering the state’s strong financial position, it is time to provide tax relief for Connecticut’s residents.â€
This is one of several tax relief measures that will be included in Governor Lamont’s upcoming budget proposal.
In addition to reducing the income tax rate, he has already announced a plan to permanently increase Connecticut’s Earned Income Tax Credit from the current rate of 30.5% to 40%, enabling low-income workers to receive an additional $44.6 million in state tax credits.
Under that increase and today’s rate reductions, families with children earning less than $50,000 a year will pay no state income tax.
He has also announced a plan to restore the pass-through entity tax credit to its original level, fully protecting small businesses from being double taxed under President Donald Trump’s changes to the federal tax code.
“This budget that I am presenting to the legislature provides a smart, strategic, and fiscally-sound plan to provide meaningful tax relief while also maintaining our overall budget discipline so that we can keep Connecticut’s fiscal health strong for many years to come,†Governor Lamont said.
Connecticut ended fiscal year 2022 with a surplus of $1.3 billion, its fourth consecutive year-end surplus for a cumulative total of $2.1 billion over that four-year period. In addition to those surpluses, since fiscal year 2018, the volatility cap provisions that were enacted in the 2017 state budget have directed $7.2 billion in resources to the state’s rainy day fund.
The combination of these unprecedented levels of resources has allowed the state to fully recapitalize the rainy day fund to the 15% level of the operating budget, which triggered a statutory provision requiring $5.8 billion to be directed toward the state’s unfunded pension liabilities.
This has led to a dramatic change in the state’s financial trajectory from the one that it experienced following the 2008 global financial crisis. These historic payments toward pension obligations have led to credit rating upgrades by all four of the agencies that rate the state’s bonds.
Governor Lamont is scheduled to deliver his budget address to the General Assembly on Wednesday, February 8, 2023, at 12:00 p.m. ■