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January 23, 2017 Capitol Biz

Progressive advocacy group says tax hikes must be part of CT budget fix

A progressive children's advocacy group is calling for a major tax increase to help solve the state's latest budget crisis, outlining more than $3 billion in revenue-raising options.

The report from Connecticut Voices for Children does not recommend a specific amount of new taxes to close projected shortfalls of $1.5 billion next fiscal year and $1.6 billion in 2018-19. But the New Haven-based public policy group outlined options that would place higher burdens on wealthy households and corporations. It also includes broadening the sales tax to cover more services and potentially establishing a new tax on sweetened beverages.

Any push to raise taxes in the next two-year state budget is expected to encounter strong political resistance. Gov. Dannel P. Malloy, a Democrat, already has said he will not recommend major tax hikes in his plan and many legislators from both parties campaigned last fall on a platform of opposition to further increases.

But Connecticut Voices noted that state officials cut more than $800 million from the funding needed to maintain current services when they adopted this year's budget last spring.

That reduction, coupled with other cuts in recent years, has reduced the share of the budget that impacts children — largely involving education, health care and social service programs — to 29.5 percent of overall spending. Those components represented about 40 percent of the budget 25 years ago, according to Voices.

Many of the options the nonprofit offers in its new report target the state income tax, Connecticut's single-largest source of tax revenue.

Recommended options, worth close to $1 billion per year in total, include: Increasing the top marginal rate on the income tax by one-half of 1 percentage point; boosting rates on capital gains and dividends-related earnings; and raising rates on the earnings of hedge fund managers as part of a regional effort to counter a controversial loophole in the federal income tax system.

– Keith Phaneuf | Connecticut Mirror

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