- Associated Press - Monday, April 28, 2014

HARTFORD, Conn. (AP) - A drop in projected state tax collections prompted Gov. Dannel P. Malloy on Monday to tentatively scrap plans for his proposed $55-per-person tax rebate, but the Democrat contends Connecticut’s economy is still doing “pretty darn good.”

Malloy’s Republican critics said Monday’s decision to take the rebate proposal off the table for this year’s state budget negotiations was emblematic of a greater problem with Connecticut’s economy, a key issue in this year’s governor’s race.

“Priority No. 1 for Dan Malloy when he was elected in 2010 was to lead Connecticut out of the Great Recession,” said Danbury Mayor Mark Boughton, one of several Republican candidates vying for the GOP’s endorsement. “After four years of trying, Dan Malloy has clearly failed at the task.”

Malloy and his budget chief, Benjamin Barnes, said the decision to forgo the tax refund, as well as a proposed supplemental pension payment, was prompted by income tax collections on capital gains in 2013 being several hundred million dollars below expectations. They blamed the revenue setback on the expiration of former President George W. Bush’s tax cuts on Jan. 1, 2013, which prompted many wealthy taxpayers in Connecticut and elsewhere to claim investment income in 2012.

“The reality is, is that one segment of income tax revenue is not coming in,” Malloy said. “We made an estimate of what we thought that would be. Other states did as well. Those estimates turned out low.”

Malloy said revenue from most other state taxes is ahead of schedule and there will be enough money to cover his administration’s priorities, including additional funding for early childhood education and assistance to manufacturers.

“The economy is actually doing pretty darn well,” Malloy said.

House Minority Leader Lawrence Cafero Jr., R-Norwalk, who called the rebate initiative “an election-year gimmick,” questioned whether the expiration of the Bush tax cuts is to blame for the revenue shortfall. Instead, he maintains it’s a sign of the state’s continuing struggling economy.

“How in God’s name can a $55 tax rebate plan have something to do with George Bush? It is beyond my comprehension,” Cafero said. “You screwed up. You did the wrong thing. Take it on the chin and move on.”

Barnes is currently negotiating a final revised budget for the fiscal year that begins on July 1 with the Democratic leaders of the legislature’s budget-writing committees. A deal must be reached on a plan for the entire General Assembly to consider before the looming May 7 adjournment deadline.

It’s unclear exactly how much surplus money they’ll have to work with. For months, it’s been estimated that the current fiscal year will end June 30 with a $500 million surplus. But Cafero said he believes it is closer to $100 million and questioned whether that figure will even hold.

Both Malloy’s budget office and the General Assembly’s Office of Fiscal Analysis are scheduled to release a consensus revenue projection by Wednesday. If there is a surplus, Barnes said it will be deposited into the state’s Rainy Day Fund.

The proposed $55-per-person tax rebate proposal came about three years after Malloy pushed through a plan in 2011 to raise various taxes by a total of approximately $2.6 billion over two years to help cover a massive state budget. That plan also included spending cuts and labor concessions.

Copyright © 2016 The Washington Times, LLC.

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