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Malloy Scraps $55 Refund

by Hugh McQuaid | Apr 28, 2014 11:08am
(23) Comments | Commenting has expired
Posted to: State Budget, Taxes

Christine Stuart photo

Scrum

(Updated 1 p.m.) Gov. Dannel P. Malloy’s administration is scrapping plans for a $55 taxpayer refund and a supplemental pension payment as tax revenues come in “hundreds of millions” of dollars less than expected.

Malloy’s Budget Secretary Benjamin Barnes informed the legislature of the change of plans in a letter Monday morning.

“We have not yet established consensus revenue, but will by April 30. Any surplus this year will be deposited into the Rainy Day Fund. We do not anticipate enough revenue to provide a tax refund or to make a supplemental pension payment, as we had hoped in January,” Barnes wrote.

Malloy had proposed using $155 million in state surplus funds to give $55 sales and gas tax refunds to an estimated 2.7 million people. However, last week the Office of Fiscal Analysis cast doubt on the proposal, saying income tax collections were coming in weaker than expected.

As of Friday the nonpartisan Office of Fiscal Analysis said the state is $323.9 million or 22.4 percent below projections and still needs to collect $510.7 million by April 30 to reach its goal.

In his letter, Barnes said that “based on the income tax collections received so far, it is clear that taxes on capital gains in 2013 will be hundreds of millions below expectations.” He said the January, 2013 expiration of the Bush tax cuts hurt revenues more than state budget analysts predicted.

“At the end of 2012, many investors across the country realized capital gains in order to take advantage of the lower tax rate. This in turn created a large federal tax penalty on capital gains realized in 2013 if those assets were held less than one year,” he wrote.

Speaking to reporters Monday afternoon, Malloy defended the refund policy.

“It wasn’t a gimmick,” he said. “I happen to firmly believe and still believe, when we have lots of money come in, well in excess of what we otherwise predict, that should be shared with taxpayers, absolutely. Let’s be very clear — my position is not different, circumstances are different.”

Despite lower-than-expected revenues, the governor said “the economy is actually doing pretty darn well.”

Hugh McQuaid Photo House Minority Leader Lawrence Cafero disagreed and seized upon Barnes’ mention of the impact of the Bush-era tax cut expiration. He said economy was “not going well.”

“How in God’s name can a $55 tax rebate plan have something to do with George Bush? It is beyond my comprehension. You screwed up. You did the wrong thing. Take it on the chin and move on,” Cafero said. “George Bush?”

Cafero said he believed revenue projections would continue to decline. He said he thought the size of the state surplus had dropped from $504 million to about $100 million. Cafero said the budget policies proposed by Republicans this year were based on the same estimates and would also need to be re-evaluated.

“We all have to re-examine what we’ve put forth. It was based on certain assumptions that as we’re seeing, based on these receipts, are no longer true. You have to act accordingly. So I understand why the governor did what he did. I get it,” he said.

Rep. Craig Miner, R-Litchfield, said he thought the contribution to the state employee pension plan made good actuarial sense, if it was done for that purpose. But “if he did this for politics I think it shows how shallow he believes people in this state are.”

As for the $55 refund, Miner said there’s no doubt in his mind that it was based on politics.

“He’s going to have to pay a political price,” Miner said. “There is not one person I spoke to in this building who thought that was a good idea.”

He said Republicans are still waiting for a seat at the negotiating table, but so far have been ignored. That means the Democratic Party “own these decisions, as well as the deficit we’re headed for.”

A poll conducted in March by Quinnipiac University suggested that a majority of voters viewed the rebate as a “political gimmick.” Of those polled, 63 percent reported disapproving of the idea while 22 percent said they believed it was good public policy.

Majority Leader Joe Aresimowicz said Democrats are being responsible and looking at the numbers. He said they start the budget process in January and February and keep a close eye on the numbers. Sometimes those numbers don’t end up where you think.

“No matter what the outcome you have to back off and do what’s best for the state,” he said.

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(23) Comments

posted by: jim black | April 28, 2014  12:40pm

So Malloy’s fake and borrowed surplus has evaporated. Interesting

posted by: ocoandasoc | April 28, 2014  1:47pm

So let me see if I have this right…. The State of CT is $324 million dollars behind schedule in its effort to have a $155 million surplus? Sorry, folks, that’s just a political euphemism for a $169 million DEFICIT! That’s right, a growing deficit that comes just a year after the biggest tax increase in the State’s history. (So now will the Governor suggest that every CT taxpayer write a check for $70 to the State so they can balance the books?)

posted by: dano860 | April 28, 2014  2:23pm

Rep. Miner, you know it was political, Dannel’s vote buying scam. ...and yes he does believe the residents are that shallow, at least the ones he was trying to buy.
Rep. Cafero, there is no surplus, when did you buy in to that pile of malarkey? If there is something, anything in the bank we should apply it to the debt.
We now have a stock market that is rolling along pretty well and yet the C.G.‘s are down. It makes you wonder what they will go after for more revenue (taxes) next? You know they aren’t going to stop the spending.

posted by: Greg | April 28, 2014  4:03pm

Blame Bush.  Shocker.

posted by: Joebigjoe | April 28, 2014  4:07pm

I think they also realized that millions of this was going to legal costs to fight gun control laws and Democrats that voted for it (as well as some Republicans). They didnt want to pay for their own demise.

posted by: Lawrence | April 28, 2014  4:11pm

It is unbelievable and downright scary that someone as experienced and powerful as Rep. Cafero would have no idea at all—even when prompted—what the effects of the end of the Bush-era capital gains tax cuts would be on 2014 income tax revenue collections in Connecticut.

That’s pretty basic economics.

posted by: Lawrence | April 28, 2014  4:14pm

“He said Republicans are still waiting for a seat at the negotiating table, but so far have been ignored. That means the Democratic Party “own these decisions, as well as the deficit we’re headed for.”

With all due respect, even with their very modest changes, the Republican ‘alternative budget’ is still more than $1 billion IN THE RED next year.

So, I’d say that deficit is ‘owned’ by both parties unless one of them comes up with a plan to completely eliminate it—which neither has.

posted by: Linda12 | April 28, 2014  5:01pm

Malloy should scrap his campaign.

Your days are dwindling, Dannel, Dan, Danny.

Tenure DENIED!

posted by: Chien DeBerger | April 28, 2014  5:07pm

Doh! Dannel Claus has turned into Dan Scrooge…

posted by: justsayin | April 28, 2014  5:28pm

None of this should surprise anyone. The assumption was not sound from day one. Malloy and the libs own this one conservatives should jump on and exploit it for the sham it was. Thank you Obama!

posted by: JAM | April 28, 2014  5:57pm

What continues to get lost in all this is that they borrowed $650 Million under the guise of GAAP conversion, and counted it as revenue. Subtract that from the current numbers and you get a clearer picture of the State’s finances - not very good.
Borrowed money is NOT revenue except in Hartford.
As pointed out elsewhere in these comments, this follows the biggest tax increase in the state’s history. Can anyone spell ” disaster”?

posted by: Lawrence | April 28, 2014  6:37pm

JAM, I agree with you that ongoing budget holes are a real problem.

But this statement—repeated by the press and by Republicans in what has become a knee-jerk manner—needs some fleshing out:

“...this follows the biggest tax increase in the state’s history.”

Let’s be absolutely clear: the increased taxes and fees that the Republicans have criticized Democrats and Governor Malloy over for three years?

They use all of it in their budget. All of it. Because CT Republicans cannot make an alternative budget without all that income. They have claimed they can, but now we know they cannot.

Have you noticed how the last two GOP alternative budgets—from 2009 and 2011—were called “no tax increase alternative budgets”??

The GOP budget released last week doesn’t mention that. Because they have bought in- hook, line and sinker—to the tax hikes they claim they reject and would do without.

Not only that, they do away with the Earned Income Tax Credit—available in Ct and 48 other U.S. states, championed by Ronald Reagan, and used by 182,000 households in CT. It’s an average $6000 for people WITH JOBS earning an average $18,000.

So, if I were the CT GOP, I would NOT talk taxes and spending with the press. They have no ‘high ground.’

posted by: Noteworthy | April 28, 2014  7:29pm

“The emperor has no clothes.”

I guess failure has come home to root…or roost.

posted by: art vandelay | April 28, 2014  7:46pm

art vandelay

When all else fails, blame it on BUSH!

posted by: DrHunterSThompson | April 28, 2014  9:34pm

DrHunterSThompson

i want my MTV .........

HST

posted by: JAM | April 29, 2014  5:50am

Lawrence,
First, I am an Independent voter, and not part of the GOP.
Second, let’s just stipulate that the tax increase was BIG and not quibble over its historical ranking.
Third, when you borrow $650Million and count it as revenue, you’re running a deficit with the current results.
Finally, both the Democrats and the GOP have to radically change the direction of State Government spending. The current path is unsustainable. And I agree neither side is acting responsibly.

posted by: Joebigjoe | April 29, 2014  7:20am

So, the magic question is what should be cut?

posted by: Lawrence | April 29, 2014  7:21am

JAM, I agree with everything you just said.

And I have a typo in my previous post. It’s an average $600 EITC credit.

posted by: UConnHoop | April 29, 2014  7:36am

First, let’s be clear that Lawrence is on the Dem payroll and part of his job is to review these sites and chime in with the Dem talking points.  The most important thing to remember about this entire 4 year debacle is that Malloy and the Dems own this entire mess.  They claimed that their tax increases and their increased regulations would stimulate the economy and end the budget deficits.  Of course nowhere on this Earth have those policies ever achieved that goal and the State of CT is no different.

posted by: jim black | April 29, 2014  9:05am

Translation, next vote buying scheme coming soon.

posted by: art vandelay | April 29, 2014  9:55am

art vandelay

In 2011, I attended one of the GOP budget presentations.  I thought their approach was well thought out and documented.  It called for cuts that would be acceptable to all with no tax increases whatsoever.  Unfortunately it fell on deaf ears and was DOA.  The state would never have been in the economic mess that it is in today had it been accepted.

posted by: ASTANVET | April 29, 2014  10:33am

I don’t understand (aside from team politics) citizens of CT defend the democrat policies that lead us to debt/deficit.  Republicans are equally as blind when it is a “R” in office, but the bottom line is that we should be protecting the state and not the party.

posted by: Joebigjoe | April 29, 2014  12:05pm

I would love to know the number when you take the retired people out. Probably still pretty high.

Houston, we have a problem! Most of these people will vote Dem if they vote. How about “no workie, no votie”.

http://cnsnews.com/news/article/ali-meyer/bls-20-american-families-no-one-works