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Malloy Proposes Deficit Mitigation Plan, With $170M in New Taxes

December 13, 2017 By Staff
Malloy Proposes Deficit Mitigation Plan, With $170M in New Taxes

2018 is going to be a long year of new tax proposals, if Dan Malloy's opening volley is any indicator.

Gov. Dan Malloy (D-Conn.) offered the opening volley in what is likely to be a months-long dialogue between the governor and legislative leaders over how to 1) close a projected budget deficit of $200 million this fiscal year and 2) restore funding to Medicare assistance for seniors that was cut in the recent budget.

In a statement, Malloy announced he is offering a “deficit mitigation” plan that closes the projected deficit and, if legislators use Malloy’s full plan, he says, will also allow legislators to fully fund the Medicare Savings Program.

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“I understand that these options will be almost universally objectionable, and that there is little appetite among you or your members for making such adjustments to your budget,” Governor Malloy wrote in his letter. “In fact, I agree these changes are difficult and that in better economic times, with a balanced budget, none of us would put them on the table for consideration. However, I have a clear statutory obligation to provide you with a plan to mitigate the deficit.”

The plan includes $189 million in tax increases (62.5 percent of the $302 million deficit mitigation plan) and $113 million in spending cuts (37.5 percent).

Some of the tax increase options offered by Malloy, and how much they would raise taxes in fiscal year (FY) 2018:

  • Increase the sales tax from 6.35 percent to 6.5 percent ($33 million) or to 6.9 percent ($114 million)
  • Increase the real estate conveyance tax rates from 0.75 percent to 1 percent and 1.25 percent to 2 percent ($25 million)
  • Increase the restaurant tax from 6.5 percent to 7 percent ($10 million)

It’s unclear if there will be any appetite in the legislature or among Connecticut voters for an increase in the sales tax.

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