Connecticut Finance Panel Backs $900M in Tax Cuts

Connecticut’s legislature is barreling toward a budget clash with Gov. Ned Lamont after the Finance, Revenue and Bonding Committee endorsed nearly $900 million in tax relief options Monday, pitching a broad menu of cuts that touches everything from clothing purchases to rent payments.

The committee must finalize its proposals by the end of Tuesday, setting up what figures to be a messy negotiation between the General Assembly and the governor before the regular legislative session closes May 6.

Lamont has pushed for a one-time rebate, a more conservative approach than what most lawmakers on both sides of the aisle are seeking. Most legislators want some form of sustained, recurring relief, though they disagree sharply on how large it should be and who should benefit most.

“I think the committee is saying very clearly that there’s a desire to address the affordability issue in Connecticut,” said Sen. John Fonfara, D-Hartford, co-chairman of the Finance, Revenue and Bonding Committee. Fonfara said his hope is “that we will be able to provide relief to as many residents of the state, as much as we can, responsibly.”

The committee’s biggest tax-cutting bill would expand sales tax exemptions starting July 1. The most significant change would remove the state’s 6.35% sales tax from clothing and footwear items priced at $100 or less. Right now, Connecticut waives that tax for one week each August during its annual sales tax holiday. The proposal would make that exemption permanent and year-round.

The same bill would cancel the sales tax on non-electronic school supplies, including backpacks, lunch boxes, pens, pencils and paper. Energy-efficient appliances such as air conditioners, washers, dryers and furnaces would also get the exemption, along with sandwiches and take-out food sold at grocery stores.

The bill’s largest relief measure, though, wouldn’t kick in until January. It includes a series of new or expanded credits against the state income tax, led by a new credit targeting low- and middle-income renters. That credit would offset up to $1,000 in annual rental costs per household. Nonpartisan analysts put the price tag for the renter credit alone at roughly $202 million.

Some legislators think even that isn’t enough. A push for broader renter relief has support among members who point to a state tax fairness study showing lower-income households carry a disproportionate share of Connecticut’s overall tax burden.

The fault lines in this fight don’t split cleanly along party lines. Republicans have concentrated their priorities on income tax reductions, arguing the state’s largest revenue source hits working families hardest. Democrats on the committee have leaned toward a combination of income and sales tax cuts aimed at specific groups. House members from both parties have urged restraint, pointing to looming fiscal pressures in the years ahead. Senators have generally pushed for a more expansive package, arguing Connecticut’s cost of living is squeezing too many households right now.

The committee’s work this week feeds directly into the General Assembly’s formal response to the $28.7 billion budget Lamont submitted in early February for the fiscal year starting July 1. The Appropriations Committee is set to adopt its own spending plan Tuesday. Together, those two documents become the legislature’s opening bid in what will likely be weeks of closed-door negotiations with the governor’s office.

For residents in Fairfield County and across the state, the outcome matters in concrete terms. Families renting apartments in Bridgeport or Norwalk could see meaningful savings if the renter credit survives the negotiation. Shoppers in any Connecticut town would feel a year-round clothing exemption at the register. But those benefits depend entirely on whether lawmakers and the governor can close a gap that, right now, looks significant.

The session deadline of May 6 gives negotiators about five weeks to find common ground. Given how far apart the governor and the legislature appear to be on both the size and structure of relief, the final package could look considerably different from what the Finance Committee approved Monday.