- Associated Press - Friday, January 31, 2014

HARTFORD, Conn. (AP) - Gov. Dannel P. Malloy, buoyed by estimates of a state budget surplus, on Friday proposed more than $104 million in new tax cuts.

The cuts, part of the governor’s budget plan for the 2015 and 2016 fiscal years, would include exempting non-prescription drugs from the state sales tax and slashing the amount of income tax retired teachers pay on their pensions.

The governor also wants to exempt municipal health care plans from the insurance premium tax, extend an investor tax credit by two years, and open up the state parks for free for two days each summer.

The moves are in addition to the plan to refund part of the state’s gas and sales tax, which the Democratic governor announced on Thursday.

“Taken together, this two-year package represents about a nearly $450 million plan that provides modest, but real relief,” Malloy said. “We won’t be able to change everything overnight. We need to take measured, responsible steps as our economy recovers based on Connecticut’s budget growth over the past few years. This tax-relief package is affordable now and into the future.”

The latest estimates have the state ending the fiscal year on June 30 with a more than $500 million surplus. But, for the fiscal years 2016 and 2017, there’s a total combined projected deficit of $2 billion.

Republicans call the governor’s gas and sales tax plan insufficient, and his tax cuts disingenuous.

“During the last three years as governor, while not running for re-election, Governor Malloy raised taxes, punished teachers and retirees, and saw deficits everywhere,” said Senate Minority leader John McKinney , R-Fairfield. “Now, in an election year, he proposes tax cuts, panders to teachers and sees surpluses even in the face of a $2 billion deficit. Maybe we should have elections every year?”

The five new tax cuts announced Friday would total $51.5 million in fiscal year 2015 and $52.9 million in the next fiscal year, Malloy said.

Angelo DeFazio, an independent pharmacist at Arrow Pharmacy in Hartford, appeared with the governor at his Friday news conference. He said the cuts will have a major impact on his clients, who are mostly lower-income patients.

“I can assure you a couple years ago when non-prescription drugs were taxed, we took quite a tongue-lashing at the register when people had to dip back into their wallets to make that payment,” he said.

The governor’s plan calls for exempting 25 percent of teachers pensions from the income tax in fiscal 2015, and 50 percent in 2016 and in the future. Malloy said it was a matter of fairness to teachers, who do not receive Social Security benefits.

Malloy has not said yet whether he’ll seek a second term, and rejected the idea that his tax-cut proposals were politically motivated.

“When we were $3.6 billion in the hole, we had to do things that I never would have wanted to do in a million years,” he said. “I called it shared sacrifice. Now we’re trying to share the rewards.”

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