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Malloy Extends Tax Relief To Retired Teachers, Towns, Consumers

by Christine Stuart | Jan 31, 2014 4:47pm
(31) Comments | Commenting has expired
Posted to: Election 2014, Health Care, Labor, Pension, State Budget, State Capitol

Christine Stuart photo

Gov. Dannel P. Malloy and Lt. Gov. Nancy Wyman

In what may seem to cynics like another attempt to win back the support of school teachers, Gov. Dannel P. Malloy proposed exempting 50 percent of teachers’ pensions from state income tax.

The proposal will cost the state $23.1 million in 2015 and $23.7 million in 2016.

Malloy said it’s been something he’s been wanting to do since his first run for governor, but the state’s fiscal condition didn’t allow it until now.

“This is an item I’ve wanted to do since 2006 when I first met with a group of retirees and realized they were treated so unfairly,” Malloy said.

He pointed out that teachers do not receive Social Security, so their pension is generally their only form of income. But most states with an income tax apply the levy to teachers’ pensions. There are only five states that don’t tax teacher pension income, according to this report compiled by the Office of Legislative Research.

Tom Singleton, president of the Association of Retired Teachers of Connecticut, said he thinks Malloy is “pretty clever in doing this because studies show that the more we take from teachers the more apt they are to move away. They like the warm weather in Florida.”

He said the money will stay in the state and benefit both the individual teacher and the economy.

Malloy upset teachers across the state when he told them in his 2012 budget address that, “Basically the only thing you have to do is show up for four years. Do that, and tenure is yours.”

In addition to exempting half a teacher’s pension from state income tax, Malloy proposed exempting over-the-counter medication from sales tax, a two-day state park fee holiday, exempting municipal health care plans from insurance premiums, and extending an angel investor tax credit. The proposals total about $51.5 million in 2015 and $52.9 million in 2016.

Angelo DeFazio of Arrow Pharmacies in Hartford said that two years ago when the state taxed over-the-counter medications for the first time, he received “quite a tongue-lashing at the register when people had to dip back into their wallets to make that payment.”

DeFazio said the decision to reinstate the exemption was a pleasant surprise.

Elizabeth Gara, executive director of the Council of Small Towns, was equally surprised. She said getting rid of the premium tax was at the top of her members list. She said it’s a large burden for smaller communities that can’t self-insure.

It will cost the state about $8.7 million in the first year and $9 million in the second year.

The money from these proposals are coming from what Malloy anticipates will be increased revenues.

“We are seeing revenue growth. We are meeting targets. We are exceeding targets,” Malloy said. On the spending side, Malloy said he’s kept spending at 2.8 percent and plans to continue to do that.

“I asked for shared sacrifice. I want to share the good times, the better times. They’re not good times. The better times,” Malloy said.

A spokesman for the House Republicans said these proposals are all recurring expenses and will add to what legislative analysts are predicting will be a $1.1 billion deficit in 2016.

Pat O’Neil, a spokesman for the House Republican caucus, said the $247 million in tax relief put forth last week by Republicans was paid for and didn’t add to any future deficit.

“It’s not clear to me how they are going to pay for this,” O’Neil said. “They have not defined how they are going to pay for this.”

Malloy Spokesman Andrew Doba chuckled at O’Neil’s comment and wondered if he was referring to the same Republicans who proposed a plan paid for “with a surplus they deny even exists.”

Sen. Minority Leader John McKinney, who is running for governor, invoked Eminem in his statement on the proposal, asking “Will the real Dan Malloy please stand up?”

“Three years ago, Governor Malloy rejected Republican ideas and instead chose to raise the income tax, the sales tax, the property tax and the gas tax, to name a few,” McKinney said. “Today, nearly 40 percent of Connecticut residents are on the brink of financial calamity, homeless shelters are overflowing, and families and businesses are struggling to pay their bills. That is shameful.” 

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(31) Comments

posted by: JamesBronsdon | January 31, 2014  5:39pm

Christine, that is so hurtful - “cynics.” Rather, I am impressed by his shamelessness. Question for you and those who know: wouldn’t the teachers unions have negotiated pensions with knowledge of their members lack of a Soc. Sec. benefit (at least as to their public school earnings)?  Me thinks perhaps that might have factored into the amount of the pension payouts. I.e., if not made whole, at least there is an adjustment in their favor.

posted by: Chien DeBerger | January 31, 2014  7:27pm

Boy Danny is pulling all the stops out for his voter base. Wonder when he starts distributing absentee voter ballots?

posted by: StanMuzyk | January 31, 2014  8:52pm

Election year rhetoric—“and there are more carrots to be promised by Gov. Malloy”—the yet to be announced Democratic Party selection candidate for reelection as Governor.

posted by: Commuter | February 1, 2014  1:49am

Wait. What?

The lede of this article should be “MALLOY COMMITS TO HOLD SPENDING GROWTH TO 2.8 PERCENT.”

Based on the average rate of inflation over the last 20 years (2.425%), Malloy is essentially committing to holding spending flat in real dollars.

That right there is a line in the sand.

The question now becomes, are Tom Foley, John McKinney, and Mark Boughton prepared to make that same commitment?

posted by: ctchar | February 1, 2014  8:05am

Is he serious!  It’s a blatant political move in an election year.  Why is there only concern for teachers who may leave the state upon retirement because of CT taxes on pensions.  All retired state residents are affected.  Teachers don’t receive social security but they also didn’t have to pay into social security all their working years!  The residents of Connecticut cannot afford to continually pay more in taxes so that only a select group - - state workers and teachers - - benefit.  Their pensions and retirement benefits are already significantly more generous than private pensions. Governor Malloy,  all residents need relief.

posted by: NoNonsense2014 | February 1, 2014  10:43am

Tom Singleton, president of the Association of Retired Teachers of Connecticut, said he thinks Malloy is “pretty clever in doing this because studies show that the more we take from teachers the more apt they are to move away. They like the warm weather in Florida.” So wait a minute… getting an income tax break will make people like warm Florida weather any less?

posted by: DirtyJobsGUy | February 1, 2014  11:14am

Quick question (or is it a trick question).  Is 50% of my pension (or IRA distribution) going to be tax free?  We are totally owned by public sector employees.

posted by: DirtyJobsGUy | February 1, 2014  2:37pm

Remember that the ability to opt out of Social security (ignoring medicare) means 6% more in their paychecks (and 6% less the school pays).  So 6% per year in a roth IRA would have been a tidy sum.  Don’t feel sorry for any public employee in the last 20 years.

posted by: Noteworthy | February 1, 2014  4:47pm

Drip by drip, Dan the Tax Man Malloy is dribbling out reduced taxes to the people he thinks will vote for him because he’s playing Santa Tax in January. This is not just cynical, it’s really poor judgement. With a billion dollar deficit looming on the horizon, and a ‘surplus” fueled mostly by gimmicks, by raiding dedicated accounts and not paying recession bonds as planned, Malloy once again shows he’s just another two-pol serial abuser who beats you up yesterday and buys you a dress today to keep you from ratting him out to the “cops.”

This is exceedingly poor public policy, as is the $55 refund check on gas taxes. The money should be kept, should be used to pay down debt or one time expenditures but under no circumstances, is it fiscally smart to program in more revenue robbers that will then add to the deficit that is gathering.

This is nothing but a crass effort to buy votes from stupid voters who can’t do basic math. Thanks for breeding contempt and cynicism in government, Dannel.

posted by: Noteworthy | February 1, 2014  4:49pm

So Dannel taxes the hell out of you today; refunds taxes tomorrow. What’s next? Dannel going to tell us to start calling him Dan?

posted by: Jim in Mfg | February 1, 2014  8:55pm

The O’Govenator is PANDERING big time.
I propose that all Connecticut State and Municipal be subject to CT state tax and withheld every month.  They earned their money in CT and they should pay CT state tax.  Do you agree?

posted by: NoNonsense2014 | February 1, 2014  9:43pm

Hey, we may be cynics, but that doesn’t mean we’re wrong.

posted by: Fisherman | February 1, 2014  11:28pm

1)  The state has never been able to fund the pension plans it’s currently indebted to.

2)  Anyone who wishes to, can go down to the local bank or credit union and sign up for a 401k or any number of investment programs.

3)  Wake-up union members!  History has proven that there is no such thing as a “dedicated fund”.  Even monies which were deemed “untouchable” (eg: transportation funding, energy-efficiency funding, client security funds, etc.) have been raided by our own legislature. Why would any of you think that this would somehow be “different”? 

4)  Our state can’t pay its own bills now (without borrowing for operating expenses); so why further deteriorate the state’s fiscal rating with a program like this?

5)  Tell me again, why you would trust the government with your savings? First they will create it; then they will raid it.

posted by: art vandelay | February 2, 2014  7:57am

art vandelay

Connecticut needs to adopt a “Resident Employment” tax.  The tax would be similar to the “Jock Tax” imposed on all professional athletes who play games in states which have income taxes.  If a retired state worker or teacher moves out of state upon retirement, said such retiree is still subject to Connecticut State Income tax no matter what.

posted by: artythesmarty | February 2, 2014  8:53am

dan is a prosecutor, mayor,governor..has never worked significant non govt job.  Except for sports watching business(espn, nbcsports, “ticketthing”) not much has happened. He may believe that Ct is populated by sports watching govt employees(by the way if you know your legislature that is what all the guys are)so this is consistent with his experience

posted by: Janster57 | February 2, 2014  10:25am

So teachers don’t get social security. Anytime one of them wants to trade their pension for my social security I’m ready!

posted by: mmal231294 | February 2, 2014  11:24am

The man has no shame. None.

posted by: StanMuzyk | February 2, 2014  11:45am

This proves we elected a lifetime politician to office.
He only thinks about his own political future—at the expense of Connecticut taxpayers—many whom voted
for our non-business-like governor. In all probability
Malloy will be giving us a
$55 to $110 tax rebate before Election Day—to pay us off for supporting high taxes and spending deficit money to promote the state economy. The probable small Gov. Malloy pay-off, however, will not help enough to move people to a state that does not have a tax and spend policy.

posted by: art vandelay | February 2, 2014  4:25pm

art vandelay

@Janster57,
When the Social Security Act was passed & signed into law, municipalities including teachers had the one time option to opt out.  Connecticut Teachers & municipal workers in Galveston, Texas are examples.  I’m told that 20-30 year retirees in Galveston retire on million dollar annuities.  They are also allowed to pass their retirement accounts onto their heirs whereas if you pass on prior to age 65 the amount you accumulated is HISTORY!.  Social Security is PONZI scheme far greater than Bernie Madoff ever could have imagined.

posted by: Joebigjoe | February 2, 2014  5:22pm

Art you are absolutely right. CT residents should get what was promised them but when you move out of this state your income moves which hurts our economy so we need to penalize people with public pensions for doing that. If they had to stay and pay the same piper we all do then they wouldnt be so quick to vote for the same tax and spend people.

posted by: robn | February 2, 2014  6:34pm

Supposing that a person will take a 50% tax break in CT over a 100% tax break in FL is a logical fallacy. They’re either staying or not.
This is a blatant bribe to acquire votes.

posted by: dano860 | February 2, 2014  8:18pm

Come on JBJ & Art, you guys know better than that. Taking anybody’s money just because they want to live the life they worked for is wrong. You sound like the guy we have at the top in Washington, D.C.
Remember the old credo, ‘live and let live’?
My money isn’t your money, the revenue grabbers need to realize that.
As soon as my wife retires we’re out of here too.  My only lament is that we will leave a house (to our son) that will still provide tax money to the town. Do it before you die, save the kids a few dollars and beat the State out of death taxes.

posted by: DrHunterSThompson | February 2, 2014  11:10pm

DrHunterSThompson

I searched these comments over and over, to find a commenter with a clue. You all will be interested to know there is not one.

HST

posted by: Joebigjoe | February 3, 2014  8:37am

I know Dano its a tough one, but the people that are going to move, which is a smart decision, voted for the people to give them the money and will now flee the damage they caused. I wouldn’t say that about people in the private sector, but for years the Dem legislature has been voted in over and over and this is the mess we now have. I don’t want to sound like Dear Leader, but maybe if they can’t run away from the damage they created they’ll vote differently.

It’s sort of like Californians. They took a great state, made it liberal as hell, decided they didnt like eating their own liberal cooking, so moved west to wreck Colorado and soon Texas. They wouldnt be so liberal if they had a financial disincentive to not wreck places they lived in like locusts do.

posted by: dano860 | February 3, 2014  9:47am

“We are overdue in Congress for a passenger rail safety bill,” Esty said. “It should have come up in October and it was a casualty of the shutdown.”
REALLY!?
With all of the issues plaguing us this is at the top of the heap?
It seems as though she heard something that sounds familiar, like “,Airline Passengers Bill of Rights,” maybe.  Nice tag line but not a major national problem as far as I can tell. One that is a problem in Ct yes but not nationally.
Is there any hope of R.O.I. on this expenditure?

posted by: robn | February 3, 2014  9:55am

DRHST,

Why is it fair to grant tax relief to some retirees and not all?

posted by: justsayin | February 3, 2014  11:36am

They signed up for this deal when they got their jobs. Sweet pension and benefits package along with great pay. They nor does their employer the state pay into SS. Why should they get more? If they want this add it to collective bargaining and see what they will give up to get it, my guess is nothing.

posted by: StanMuzyk | February 3, 2014  6:52pm

More political propaganda coming from Gov. Malloy. He says this is something he has been wanting to do since his first run for Governor, but he state fiscal condition did not allow it till now!”  Who’s kidding who?  Our deficit at the end of the fiscal year is projected to be one billion dollars. Our Governor never has a problem with spending money we do not have. He should end his continual tax and spend record and give our citizens a real break.

posted by: Bluecoat | February 4, 2014  9:56am

Horray!
I can spend that $55.00 to buy 1 new light bulb!!!!

posted by: BMS | February 4, 2014  10:47am

The state of Pennsylvania does not tax social security. In addition, after age 591/2 pensions both public sector and private sector are not taxed. Distributions from deferred compensation plans, 401K’s and IRA’s are also tax exempt. Pennsylvania wants to keep there seniors there. The percentage of the population over 65 in Pennsylvania is second only to Florida. Seniors don’t have children in the school system but pay property taxes, gas taxes, and sales taxes. The seniors income stimulate the local economy. Connecticut should try and keep all seniors here, not just teachers.

posted by: dano860 | February 5, 2014  12:10am

Christine, my last comment was intended for the Sunday railroad story. Sorry