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Ned Lamont to issue $170 million in one-time tax relief this August

Ned Lamont
Mark Pazniokas

In roughly two months, Gov. Ned Lamont’s administration will send out nearly $170 million in tax rebates and other payments to low- and middle-income families with children and to Connecticut’s working poor.

While it’s part of one of the largest tax cuts in state history, it also marks the largest election-year outpouring of one-time relief since Republican Gov. John G. Rowland sent $115 million in income tax rebates to Connecticut households as he sought reelection in 1998.

Many Democrats derided Rowland’s move as fiscally irresponsible pandering to voters. GOP critics now charge Lamont, a Democrat, with the same.

“I’m going to do everything I can to make Connecticut the most family-friendly state in the country,” Lamont said Thursday during a mid-morning press conference in Hartford.

Working poor and many households with kids to get rebates

The administration hopes to send out at least 300,000 child tax rebates this summer to single parents who earned less than $100,000 in 2021 and to two-parent families that earned less than $200,000.

Income-eligible households would receive $250 per child up to a maximum of $750.

Families must file with the state Department of Revenue Services between June 1 and July 31 to receive a credit. The administration said it expects to issue the relief in August.

Around the same time, it also expects to distribute $40 million to $45 million among roughly 180,000 working poor households who claimed the state’s Earned Income Tax Credit on their 2021 state tax returns. That comes to about $300 per filer.

To qualify for the EITC in 2021, a household had to earn $57,414 or less. And while the credit often is touted as a program to help poor working people save money, advocates say that because of Connecticut’s high cost of living, most recipients spend their entire benefit to cover outstanding utility, grocery or medical bills.

The state EITC currently is worth 30% of the federal credit and provides recipients an average benefit of $700.

The one-time $300 bump Lamont and the Democrat-controlled legislature approved for EITC recipients effectively raises the state credit temporarily to 41.5% of the federal tax benefit.

But tax-reform advocates have been pushing for years to make permanent a child tax credit and an enhanced EITC program.

Will this one-time relief be renewed next year?

“Let’s see what the environment looks like a year from now, but this is an important program, something that will be a priority for me,” said Lamont, who is running for a second term this November.

The governor has said he wants to reassess the state’s fiscal health after much of the $3 billion in federal pandemic relief Connecticut received last year has been exhausted.

GOP: Lamont following the Rowland reelection playbook

Republicans aren’t buying it.

“This relief is for Election Day pandering versus the long-term systemic change that we could have provided all of the taxpayers,” said House Minority Leader Vincent J. Candelora, R-North Branford.

Fiscal analysts already are projecting modest surpluses for 2024 and 2025, when most of the federal aid will be gone. Connecticut has an unprecedented $3.1 billion in its rainy day fund and is projected to close this fiscal year with a record-setting $4.8 billion surplus.

The $663 million tax relief package Lamont and his fellow Democrats enacted this spring represents about 8% of that fiscal cushion, and more than half of the relief is temporary.

Besides the summer rebates, other one-time measures included a $40 million payment to help businesses cover unemployment trust debt and a retail gas tax holiday that runs through Nov. 30.

The Democrats’ chief ongoing relief measures included expanding the property tax credit within the state income tax system and lowering the statewide cap on municipal car taxes from 45 to 32.46 mills.

Republican minorities in the House and Senate endorsed a gasoline tax holiday and a one-time rollback of sales tax rates, but their $1.2 billion proposal also called for a wide array of ongoing measures including:

• The first middle-class income tax rate cut since 1995;

• An adjustment of all income tax rates annually to compensate for inflation;

• Repeal of the highway use tax on large commercial trucks;

• And an expansion of the property tax credit.

The last time a governor sent out rebates during a reelection campaign was in 1998, when Rowland and a Democrat-controlled General Assembly doled out $115 million in surplus income tax receipts at $50 per person.

Adjusted for inflation, that would represent a $204 million expenditure now.

Rowland cruised to an easy reelection win over U.S. Rep. Barbara Kennelly of Hartford, and her fellow Democrats would deride those rebates for decades afterward.

For Lamont to steal a page from the Rowland playbook, said Senate Minority Leader Kevin Kelly, R-Stratford, “shows what their endgame is. … Let’s call it what it is: These are ‘reelect me’ rebates.”

The Democrats’ gasoline tax holiday doesn’t even last through December and the holiday shopping season — as Republicans proposed — but stops at the end of November, Kelly added.

Madison Republican Bob Stefanowski, who lost the 2018 gubernatorial race to Lamont and is his opponent again this year, said that while he applauds giving tax relief to residents, “it is only one-time relief and doesn’t do enough to offset the … inflation that’s hurting Connecticut families.”

Scanlon: CT took huge step toward greater tax fairness

But Rep. Sean Scanlon, D-Guilford, who spearheaded the fight that led to the child tax rebates, said the comparisons to the Rowland rebates simply are wrong.

Scanlon battled for the past two years to create a new child tax credit, and other tax reform advocates have pushed for relief for the working poor even longer than that.

“Sending somebody a $50 rebate is different,” he said, “than [sending] a mother of three a check for $750.”

More importantly, said Scanlon, Connecticut has never had a child tax credit before. Establishing the program this year — even on a one-time basis — sets the stage for reform advocates to make the program ongoing in 2023.

“We passed a budget that met the moment,” he added. “This is a pro-family state that is going to be there for the middle class.”

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