Rell Will Agree to Millionaire's Tax: Wants Sales, Estate Tax Cuts

In an effort to find compromise with majority Democrats, Gov. Jodi Rell has indicated her willingness to accept an increase in taxes on people making over $500,000, as long as Democrats cut spending, eliminate the estate tax, and cut the sales tax from 6.0% to 5.5%.

Stories here: CTNJ; Courant.

Once again, Rell takes everyone by surprise on the eve of major Democratic action. So far Democratic leaders are in their usual state of befuddlement, so we won’t have any kind of idea where this is going to go until tomorrow.

So the wealthy would see a tax increase, but they’d also see estate taxes disappear. Therefore, they might stick around (though there is precious little evidence that they’ve actually been fleeing the state in droves). Sales tax decreases would impact everyone, and the governor seems to think that the decrease could act as an economic stimulus.

What do you think?

[poll id=”27″]

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7 responses to “Rell Will Agree to Millionaire's Tax: Wants Sales, Estate Tax Cuts

  1. I read the income tax hike is retroactive to Jan 1.

    Is the sales tax cut retroactive to Jan 1?

  2. How many people are there who work in Connecticut and make over $500,000 per year? How many residents of Connecticut have over $500,000 in non-wage income (capital gains, interest, dividends)? This is the pool that will supposedly makes up the hole in the budget?

    (If someone lives in CT but works in NY, that doesn’t count, CT still collects no taxes unless the individuals get income from non-wage sources).

    Not that it matters as much anymore, but are profits on home sales exempt? So if someone bought a house for $80,000 in the 70s and sells it now for $600,000, is that $520,000 profit taxable?

    Nationwide, in 2007, the cut off to get to the top 1% was $410,096. So in other words, less than 1% of the population in the country made over $500K. The top 0.1% cutoff in 2007 was $2,155,365. In 2007, there were 101,088 return filed by CT residents showing income of over $200,000.

    So seriously, how much does this raise, assuming no one moves out? How much do sales tax receipts fall? I guess, assuming no economic changes, that would be 1/12. But with or without a sales tax cut, there are going to be some economic consequences. It would seem to be that automobiles, building material and furniture would fund a good chunk of the sales tax revenue (food and clothing under $50 are exempt). I guess in theory, some people might be more willing to buy local than via mail order if the sales taxes go down…

    So, assuming no economic changes from the tax cuts themselves, what are the monetary effects of this?

    Also, what exactly does Rell stand for?

  3. [quote]How many people are there who work in Connecticut and make over $500,000 per year?[/quote]

    In 2007 there were a total of 46020 filings where the income was in excess of $500,000.

    Those few, only 2.6% of all filers; paid a whopping 42.5% of the total income tax received.

    A Look At Who Pays Connecticut’s Income Tax
    The Yankee Institute for Public Policy

  4. Well I see the “quote” deal doesn’t work anymore.

  5. It took while for the lady to collapse.

    First Gov. Jodi Rell, who had stuck to her no-tax-increase guns long after the fiscal year ended, proposed a tax increase of half a billion dollars to discharge a deficit of about $2 billion. Waiting in the wings is a much larger deficit of $9 billion. Leading Democrats in the legislature were steadfast in a) refusing to submit any budget and b) insisting upon minimal spending cuts and maximum tax increases.

    At the tail end of August, Democrats, after futile private negotiations with the governor, announced that they were preparing to submit their own budget to the legislature.

    Senate President Pro Tem Donald Williams, said, “We’re revising our proposal.”

    Speaker of the House Chris Donovan said, “We are preparing a budget.”

    According to one report, “Donovan said the Democrats will be reducing the amount of the increase in the state income tax, but he declined to reveal the potential rates or the income thresholds that would be affected. The new plan will offer lower taxes and more spending cuts than the most recent Democratic plan.”

    Apparently, the two worthies were not asked by reporters why they could not submit their “revised plan” before the fiscal year ended.

    The following day, Rell – possibly after negotiations with her shadow governor, chief aide Lisa Moody, decided to jump in front of the freight train.

    Newspapers reported that Rell was having nagging second thoughts about the budget. The lady would present a new, revised budget. These second thoughts followed close on the heels of the Democrat’s announcement they would present their own budget and go it alone.

    Rell’s proposal surrendered to Democrats half a loaf. Folding on the principle she had been ardently defending – no new taxes — Rell’s new budget plan includes a raise in the state income tax to 6.5 percent on couples earning more than $1 million per year and individuals earning more than $500,000 per year. The current maximum rate is 5 percent.

    This is Rell’s version of the millionaire’s tax Democrat leaders in the House and Senate, Don Williams and Chris Donovan, have been lusting after. The increase in Rell’s revised budget, retroactive to Jan. 1, 2009, is expected to hall in more than $1 billion in the next two years. In addition, Rell is proposing to cut the sales tax back a half a percentage point to 5.5 percent. Pointing to a survey, the governor expects her proposed cut in the sales tax to produce 8,300 jobs.

    “This is a huge, huge boost to our economy,” Rell enthused.

    Over in neighboring Rhode Island, the Republican governor has proposed to deal with the state’s deficit by shutting down state government for 12 days.

    There was no immediate indication that Democrats, who had threatened to present their own budget in the legislature, would agree to Rell’s terms of surrender.

    What to make of all this?

    What Rell’s new proposal really does is to cut no-tax-increase Republicans out of the negotiation loop. From this point onward, Republican opposition to any final agreement made between the governor and leaders in the legislature may be safely discounted.

    Rell and Moody, sometimes praised in the media for her disposition to bargain pragmatically with the Democratic opposition, are now in the ring alone with President Pro Tem of the Senate Don Williams and Speaker of the House Chris Donovan, who used to be a union steward and is no stranger to bargaining.

    The Democrats have a veto proof majority in the legislature and could, assuming the leaders were to marshal sufficient votes, override a gubernatorial veto.

    It is as if, prior to the battle of The Little Big Horn, General George Custer were to dismiss his troops and attack the overwhelming force arrayed against him alone, accompanied by his chief scout and his accountant.

    But here is nothing unusual in this arrangement. As Yogi Berra might say: “It’s Déjà vu all over again.” This is the third time Gov. Rell has proposed to increase taxes.

    This time, it will be a take.

  6. Well I see the “quote” deal doesn’t work anymore.

    Use [blockquote] but replace the [] with

  7. “” without the quotes.

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