Governor Lamont Signs Largest Income Tax Cut in Connecticut History
(HARTFORD, CT) – Governor Ned Lamont today signed into law legislation enacting the fiscal years 2024 and 2025 biennial state budget (House Bill 6941), which contains several tax relief measures for Connecticut residents that includes the largest reduction in the income tax in state history.
The tax relief measures include:
- An income tax cut for the middle class that reduces the two lowest marginal rates. Specifically, the 3% rate on the first $10,000 earned by individuals and the first $20,000 by couples will decrease to 2%. The 5% rate on the next $40,000 earned by individuals and the next $80,000 by couples will decrease to 4.5%. These benefits will be capped at individual filers who earn $150,000 and couples who earn $300,000. It is estimated that one million tax filers will benefit from the rate cuts.
- An increase in the Earned Income Tax Credit for low-income workers from the current rate of 30.5% of the federal credit to 40%. The Earned Income Tax Credit is a refundable state income tax credit for low-income working individuals and families that mirrors the federal credit. This change will provide an additional $44.6 million in state tax credits to an estimated 211,000 low-income filers. This new 40% rate makes Connecticut among the top five states in the nation with the largest Earned Income Tax Credit rates.
- An expansion of existing exemptions on certain pension and annuity earnings to benefit seniors. Specifically, the budget eliminates the retirement income tax cliff by adding a phase-out for allowable pension and annuity and IRA distribution deductions against the personal income tax.
“The reason why I am able to sign a budget today that implements the largest cut ever made to Connecticut’s income tax is because of the fiscal discipline that we implemented over the last several years to stabilize our fiscal house and end what has been too many years of uncertainty and deficits,” Governor Lamont said. “We targeted these tax cuts and credits specifically for middle-class and working-class taxpayers because we want to enact the broadest-based relief possible to those who need it. I am glad to sign a bill providing tax relief to our residents.
“I am particularly proud that we were able to negotiate and pass this budget in a bipartisan manner with both Democrats and Republicans actively participating,” the governor added. “I am fully aware that this makes Connecticut an outlier among the states in this current political climate and I don’t take that for granted. By working together collaboratively, we are making Connecticut stronger and adopting policies that benefit the people who live here. I thank the legislative leaders on both sides of the aisle for their work on this biennial budget.”
Notable investments in the budget:
- Provides $25 million in additional Special Education funding in FY 2024 and FY 2025.
- Provides $48 million in FY 2024 and $96 million in FY 2025 to continue the Education Cost Sharing (ECS) formula phase-in.
- Provides $6.6 million in FY 2024 and $13.2 million in FY 2025 to hold towns harmless from ECS declines.
- Provides $150 million in FY 2025 for Education Finance Reform.
- Provides $14.2 million and $53.3 million in FY 2024 and FY 2025 to fund rate increases of 11% for licensed providers and 6% for unlicensed providers in the Care4Kids system. This is supplemented by a $35 million American Rescue Plan Act (ARPA) allocation.
- Provides $15.5 million to increase Infant Pre-K rates to $10,500 per pupil in School Readiness and Child Day Care Contract programs in FY 2025.
- Funds the state’s portion of collective bargaining increases for all constituent units.
- Provides an increase of more than $500 million over the biennium in one-time operating support to help the University of Connecticut and Connecticut State Colleges and Universities transition back to a sustainable level of state support.
- Restructures fringe benefit funding to the constituent units to ensure that the state’s unfunded pension liability is not being passed on to students and make the universities more competitive for federal grants.
- Provides $6 million for student loan reimbursements.
- Includes permanent funding for PACT and expands PACT to include students returning to college after being previously enrolled. Increases minimum PACT award amount.
- Provides $810 million over the biennium in capital support towards housing development and housing financial assistance, including:
- $150 million ($75 million annually) towards the state’s popular Time-To-Own program. This level of funding is expected to assist in the purchase of more than 1,250 homes annually.
- $200 million ($100 million annually) to expand workforce development housing, which is expected to provide an additional 2,000 units of housing.
- $200 million ($100 million annually) for the Housing Trust Fund, with an emphasis on multi-unit housing in downtown areas close to transportation.
- $200 million ($100 million annually) for flexible housing.
- $50 million ($25 million annually) for the Housing Receivership Fund. This funding will provide state resources for rehabilitation of existing housing that have been put under court ordered receivership.
- $10 million ($5 million annually) for low-interest loans to Time-To-Own recipients for unanticipated capital improvements to their newly purchased homes.
- Provides $2 million in FY 2024 only in ARPA funds to invest in the flexible funding subsidy pool of housing and homeless support to subsidize housing and provide flexible assistance to help individuals, families and youth overcome financial barriers and expedite solutions to homelessness.
- Provides funding of $1 million in both FY 2024 and FY 2025 in ARPA funds for housing support services.
- Provides funding of $10 million in FY 2024 in ARPA funds for various housing initiatives.
- Provides funding of $1.1 million in FY 2024 and $1.38 million in FY 2025 in General Fund dollars for the 24/7 operation of the 2-1-1 Housing Crisis line.
- Provides $5 million in FY 2024 in the General Fund for shelters.
- Provides an additional $206.6 million over the biennium to strengthen private providers.
- Funds $53.3 million in each fiscal year across all private providers, including Department of Developmental Services-contracted providers – roughly equivalent to a 2.5% increase.
- Funds $50 million each year specific to Department of Developmental Services-contracted providers – roughly equivalent to a 4.5% increase.
- Includes capital funding for the Nonprofit Grant Program ($25 million in FY 2024, $25 million in FY 2025):
- Facility upgrades to improve health, workplace safety conditions, and strengthen quality of care.
- New dedicated position in the Office of Policy and Management will oversee the program and future rounds of funding.
Autism and intellectual/developmental disability supports
- Establishes lead planning role and dedicated staff at the Office of Policy and Management to review the continuum of autism services across state agencies and school districts, identify gaps, and coordinate services.
- Adds position at the Office of Policy and Management to coordinate programs and services for individuals who have intellectual or developmental disability other than autism.
- Funds Department of Developmental Services caseload growth ($44.0 million over biennium):
- Day services for more than 900 age outs and high school graduates over the biennium ($7.3 million in FY 2024 and $17.5 million in FY 2025).
- Residential supports for more than 188 age outs and Money Follows the Person transitions over the biennium ($5.8 million in FY 2024 and $13.4 million).
- Adds $21.1 million over the biennium to address Department of Developmental Services waiting lists for residential programs.
- Adds a total of 320 new autism waiver slots by 2026.
- Augments transition services in the Department of Aging and Disability Services and the Department of Developmental Services for youth aging out of high school.
- Stabilizes intermediate care facility providers with one-time support ($5.6 million) and a phased rebasing to reflect actual costs ($1.9 million FY 2024, $2.1 million FY 2025).