Democrats, Rell Differ On Tax Break Package; Spending Cap May Be Threatened

HARTFORD (AP) – State lawmakers and Republican Gov. M. Jodi Rell are considering ways to shield Connecticut from the full impact of a slowing economy, but would use different fiscal tools for the job.

The legislature’s Democratic majority and Republican minority leaders met with Rell Tuesday to discuss proposals for the state budget that Rell will present to the General Assembly when it convenes for its three-month legislative session on February 6.

Donald E. Williams Jr., Senate president pro tem, said the two sides broadly agree that some action is needed, but have not settled on specifics.

“Folks did not rule out any suggestion,” said Williams, D-Brooklyn.

Democrats proposed an increase in the property tax credit of $250 per taxpayer from the current $500 maximum, a refundable earned income tax credit, broader mortgage relief, a one-year moratorium on the business entity fee and more money for energy relief.

The lawmakers said at a news conference that their plan is intended to help businesses and low-income residents cope with rising prices for food and fuel, home mortgage troubles and other setbacks that threaten the state’s economy.

Williams said the Democratic plan, which he estimated at about $200 million, would be paid for with the state surplus of $250 million.

“The state of Connecticut has a surplus. Connecticut families have no surplus,” Williams said. “People are having a difficult time making ends meet.”

Christopher Cooper, a spokesman for Rell, said the Democratic plan would break the state’s spending cap, which the governor opposes.

Rell supports eliminating the business entity tax, he said. The tax is a $250 annual fee paid by mostly small businesses or limited liability corporations, which are not subject to the steeper state corporation taxes, Cooper said.

The governor opposes an earned income tax credit because it would give tax breaks to people who do not pay taxes, Cooper said.

“We know people who are struggling are the middle class,” he said. “Relief should be targeted to the middle class.”

Rell will ask the General Assembly to enact a cap on property taxes, “the kind of middle class tax reform that people have talked about,” Cooper said.

The Democrats’ proposed earned income tax credit, which has failed in previous legislative sessions, would benefit taxpayers earning up to abut $38,000. A 20 percent credit would provide a maximum benefit of $940 to a family with two children, according to the proposal.

Benefits that would reach about 165,000 taxpayers would vary, Senate Democrats say.

Leaders of the Republican minority in the state House of Representatives have scheduled a news conference to outline their budget proposals. House GOP leader Lawrence Cafero Jr. of Norwalk said Senate Democrats deserve credit for proposing ways to counter the economic slowdown.

“I embrace the fact that they’re thinking along the same lines we are,” he said.