Connecticut, faced with $208M deficit, seeks to raise taxes even higher

By Government SpendingFOXBusiness

Tax the rich backfires in Connecticut

FBN's Gerri Willis discusses how Connecticuts tax the rich efforts are falling short.

After suffering through months of conflict and stalemate over the adoption of a fiscal year 2018 budget, about halfway through the year, Connecticut is still coming up short on revenue.

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A new report by the National Association of State Budget Officers (NASBO) showed that revenue from state sales and personal income tax have fallen around $208 million short of projections. The state is one of just 17 that has dipped into its rainy day fund for survival over the past year. That rainy day fund balance is currently at $213 million, according to NASBO.

Meanwhile, under the budget adopted in October, state lawmakers made spending cuts to everything from education to public assistance programs. The state also attempted to generate revenue from a tax hike on cigarettes to $4.35 per pack from $3.90 per pack, which could increase even further under a new proposal.

On Wednesday, Gov. Dannel Malloy (D-Conn.) released a suggested series of measures aimed at rebalancing the budget, which include raising the state sales tax as high as 6.9%, removing the exemption for nonprescription drugs, raising the cigarette tax to $4.60 per pack and cutting municipal aid.

“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,” Malloy wrote on Wednesday.

The proposals would cumulatively raise $303 million, according to the governor.

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Despite having a per capita personal income that is more than 143% of the national average—according to Moody’s Investors Service— the state’s economy continues to lag behind others. Revenue shortfalls in the state registered around $450 million for the last fiscal year. Debt outstanding levels and unfunded pension liabilities relative to revenues are among the highest of any state in the country, Moody’s said in May.

Adding to Connecticut’s troubles, a slew of high-profile businesses have committed to relocating their headquarters from the state. General Electric (NYSE:GE), Aetna (NYSE:AET) and Alexion Pharmaceuticals (NYSE:ALXN) have all announced plans to relocate, with GE and Alexion’s respective moves to Boston scheduled for completion next year, while Aetna will head to New York.

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