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Surging CT income tax receipts bolster budget reserve

But Connecticut might be better off not counting all of that ... some areas besides quarterly income tax filings are underperforming, including sales and real estate taxes. Keith, with Jacqueline Rabe Thomas, won first prize in investigative reporting ...

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Budget director Benjamin Barnes An anticipated surge in state income tax receipts has bolstered Connecticut’s emergency reserves to nearly $900 million. But it remains unclear how much of the windfall identified Tuesday by budget analysts is lasting — and how much is only an advance payment of funds Connecticut otherwise would receive in mid-April. The surging tax receipts identified by GovDannel PMalloy’s administration and by the legislature’s nonpartisan Office of Fiscal Analysis also aren’t available to close the $224 million deficit projected for the current fiscal year. That’s because of a new budget requirement that automatically deposits the bulk of this new revenue in the emergency reserve — commonly known as the Rainy Day Fund — rather than making it available for use in the General Fund. “We should all be encouraged by the substantial deposit to the Rainy Day Fund that we and OFA are projecting,” said Office of Policy and Management Secretary Ben Barnes, Malloy’s budget director“I am especially pleased that the new Volatility Cap law requires that the recently disclosed, one-time windfall in tax collections will be set aside in reserve.” Senate President Pro Tem Martin MLooney, D-New Haven, said legislative leaders are committed to begin working immediately to close this year’s budget deficit“A bipartisan budget requires a bipartisan budget fix,” Looney said“The Consensus Revenue Report has made clear that we have more work to do to rebalance the budgetThat’s why, last week, I called on Democratic and Republican legislative leaders to begin meeting immediately so that we can build a framework to solve Connecticut’s current budget deficit and address several other critical areas of the budget.” Analysts, who are mandated to project budget revenues three times annually, estimated in Tuesday’s report that the income tax would collect $9.77 billion this fiscal year, which ends June 30. That’s $586 million more than the level legislators anticipated when they crafted the budget last fall. That $586 million increase actually reflects a $675 million jump in receipts tied to quarterly filings — which primarily involve capital gains and other investment income — and a roughly $90 million drop in receipts from paycheck withholding. Because of the new volatility cap provision in the state budget, $665 million of that $675 million surge in income tax receipts tied to quarterly filings must be deposited into the state’s cash-starved emergency reserve. That fund was holding just $212 million — an amount equal to just 1.1 percent of annual operating costsComptroller Kevin PLembo recommends a reserve of at least 15 percent. With the $665 million deposit the reserve now exceeds $887 million, or 4.7 percent. Malloy had warned last week that quarterly payments received in December and January by the Department of Revenue Services were running $900 million ahead of projections. Only about $675 million of that $900 million has been deposited to dateBecause this largely involves enormous payments from a few wealthy taxpayers, payments can take weeks to clear — and some won’t be counted until the next revenue forecast is issued on April 30. But Connecticut might be better off not counting all of that $900 million bonus now — since Malloy and some legislative leaders have said some of it is an illusion. Some households, they said, paid more state taxes in December because their investment earnings grewBut others also inflated their December 2017 payments — while also intending to reduce their April 2018 payments — to take better advantage of changing federal income tax laws. In other words, some of state income tax payments Connecticut received in December simply are an advance of money it otherwise would receive this April. Congress recently capped the level of federal income tax deductions that can be claimed for state and local taxes paid — starting in the 2018 tax year and reflected on the returns households will file in the spring of 2019. So by making extra state tax payments in 2017, households still can take maximum advantage of the outgoing federal income tax system of deductions before it expires. House Minority Leader Themis Klarides, R-Derby, also urged caution Tuesday when it comes to state finances, saying the best way to mitigate the budget deficit is to cut spending. “Huge tax hikes without significant reductions in spending are not the answer,’’ she said, noting that the new reports shows revenues in some areas besides quarterly income tax filings are underperforming, including sales and real estate taxes. Despite the recent surge in income tax receipts, Senate Republican leader Len Fasano of North Haven said the overall weakness of other revenues represent “more of the same signs of a sluggish economy that continues to restrain growth in ConnecticutOur state remains well behind the progress of other states as a result of the failed policies of Governor Malloy and legislative Democrats.” Print Filed Under: Budget/Economycapital gainsConnecticut income taxestimates and finalsRainy Day Fund About Keith MPhaneufMore by this authorKeith, with Jacqueline Rabe Thomas, won first prize in investigative reporting from the Education Writers Association in 2012 for a series of stories on the Board of Regents for Higher EducationThe former State Capitol bureau chief for The Journal Inquirer of Manchester, Keith has spent most of 24 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut's transportation and social services networksA former contributing writer to The New York Times, Keith is a graduate of and a former journalism instructor at the University of ConnecticutE-mail him at More About Budget/Economycapital gainsConnecticut income taxRainy Day Fund Shutdown impact on CT would depend on how long it lastsWASHINGTON — The U.SHouse approved a short-term spending bill late Thursday, but the legislation that would avert a government shutdown is expected to face a tough time in the SenateA shutdown's impact on Connecticut would depend on how long it lasts CT lawmakers weigh revival of earmarksState, hospitals butt heads over proposed rate hikes View all Budget/Economy Posts → CT finances take another big hit as projected revenues plungeConnecticut’s finances were dealt a major blow Thursday when nonpartisan analysts downgraded projected income tax receipts by hundreds of millions of dollars for this fiscal year and next. State tax debate: Whose plan really helps the middle class?Panel will consider plan to boost CT income taxes on the wealthy View all capital gains Posts → Federal tax changes further polarize debate over state income taxNow that Congress has passed a massive federal tax overhaul, political observers here agree it could have a chilling effect on future proposals to raise the Connecticut income tax — even 14 months from now when a huge deficit looms in state financesBut liberals and conservatives were split over whether this is a good thing, as huge pressures are projected to test state finances in unprecedented fashion in the coming years. Federal tax changes could create misleading budget 'bubble' in CTToubman: 'If we don’t raise revenue somehow, we shred the safety net' View all Connecticut income tax Posts → Senate sends plan to close current CT budget deficit to HouseThe Senate unanimously approved a plan Tuesday evening to cover the $317 million state deficit in the current fiscal year — albeit by draining most of Connecticut’s modest emergency reserve. Senate Democrats make new and old pitch for CT budget reformOutgoing CT budget springs another leak, could threaten next year's as well View all Rainy Day Fund Posts → Previous PostMalloy names Thomas JSaadi to lead Veterans AffairsNext PostMalloy vetoes Medicare program fix, calls it 'wishful' budgeting Comments comments Our SponsorsMorning Briefing Receive Our Free Daily Briefing #mc_embed_signup{background: none; clear:left; font:14px Helvetica,Arial,sans-serif;position:relative;width: 100%; margin-bottom: -44px;margin-top: -12px;} #mc_embed_signup .mc-field-group { padding-bottom: 10px; margin-bottom: 0; min-height: 0px !important; position: static; } #theButton { margin-top: 0px; float: right; z-index: 1000 !important; border-radius: 0; } #mc_embed_signup .mc-field-group input { padding: 8px 0 8px; font-size: 10px; text-transform: uppercase; font-family: "Futura",Arial,sans-serif; letter-spacing: 1px; } #mc_embed_signup .button { border-radius: 0px; height: 31px; font-family: "Futura","Arial",Sans-serif; text-transform: uppercase; font-size: 11px; padding: 0px 12px; margin: 0; position: absolute; top: 10px; right: 0; background: #ddd; color: #434343; } #mc_embed_signup .button:hover { background: #EDE698;} #mc_embed_signup div.response { float: left; margin: 0px 0; padding: 0 0; font-weight: bold; float: left; top: 0em; left: -0; z-index: 1; /* border: 1px solid #ccc; */ width: 100%; background: white; font-size: 12px; } #mc_embed_signup form { display: block; position: relative; text-align: left; padding: 10px 0 0px 0%; } #mc_embed_signup { width:100%; } input#mce-EMAIL:focus { outline: none; } #mc_embed_signup input { border: 1px solid #ddd; -webkit-appearance: none; border-radius: 0px; }

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