HARTFORD, CT - Governor Dannel P. Malloy’s FY19 budget adjustment proposal contains two specific provisions to protect Connecticut residents and employers from the negative effects of the federal Republican tax law that was adopted by Congress late last year and signed by President Trump.
Under the federal law, hundreds of thousands of residents will see a tax increase, property values could decrease significantly, and 13 million more Americans will become uninsured. Currently, 41.04 percent of Connecticut residents claim the state and local tax (SALT) deduction, averaging $18,939.72 and putting the state second in the country (behind New York’s average of $21,038.02). In total, the Republican tax bill is expected affect 171,118 taxpayers claiming $10.330 billion in federal tax deductions.
“The Republican tax law will hurt Connecticut residents if we don’t take immediate action,” Governor Malloy said. “Let’s be clear about what this backwards legislation really does. Eighty-three percent of the benefits from this law go to the top one percent, while taxes actually increase for many middle class Connecticut families. It is nothing more than a massive giveaway for the very wealthy while the middle class pick up the tab. The actions we are proposing aim to protect Connecticut residents and businesses, who are specifically targeted by this law.”
Specifically, Governor Malloy’s plan proposes the following:
A new revenue-neutral tax on pass-through entities, fully offset by a personal income tax credit, will prevent Connecticut’s small business owners from being targeted by the federal tax law.
Allowing municipalities to create charitable organizations that support town services, in conjunction with a local property tax credit, will allow our cities and towns to continue to provide services while reducing individuals’ federal taxes.
To avoid a General Fund revenue loss, Connecticut will not adopt federal tax changes related to accelerated depreciation and asset expensing.
“I applaud Governor Malloy for his efforts to protect Connecticut taxpayers from the Trump tax plan,” Lt. Governor Nancy Wyman said. “This law is upside-down, taxing working families more to pay for tax cuts for the wealthiest one percent. It is poised to do significant harm to taxpayers here in Connecticut and throughout the region. We must act now to try to reduce the burden on our residents.”
“The new federal tax bill passed by President Trump and the Republican Congress will cost Connecticut taxpayers over $10 billion in lost deductions for state and local taxes,” Department of Revenue Services Commissioner Kevin Sullivan said. “Governor Malloy’s proposals go a long way to help tens of thousands of Connecticut taxpayers avoid increased federal taxes due to this substantial federal loss. Locally, cities and towns could offer the option of municipal foundation donations eligible for federal charitable deduction instead of property tax payments. The Governor’s second proposal would help businesses that remain eligible to federally deduct state and local tax payments pass along the benefit to individual taxpayers who could claim an equivalent state income tax credit. All of this is fully consistent with long-existing federal tax practice, and Connecticut will fight any attempt to pressure the IRS into pressuring the states.”
“Taxpayers who itemize will have their deductions for state individual income, sales, and property taxes limited to a cap of $10,000 starting in 2018,” Norwalk Mayor Harry Rilling said. “I support any efforts made by the Governor and the state’s legislature to reduce the impact of this limit on SALT deductions on taxpayers, particularly for those living in the City of Norwalk. The details of the Governor’s plan will require a great deal of analysis and discussion and I look forward to participating in this effort.”
“Numerous people in our community are highly concerned by the federal tax law, which will impact their bottom lines negatively,” South Windsor Mayor Saud Anwar said. “I am hopeful we can come up with a solution, and the Governor’s proposal is a step in the right direction.”
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