Are tax cuts, COVID relief enough to offset inflation?
After a spring of high gas prices and a summer when inflation topped 9%, the Connecticut Democrats are reminding voters this week of the dollars the state is putting back into family budgets.
But even as Gov. Ned Lamont reminded shoppers to take advantage of another sales-tax-free week and watch their mailboxes for child tax refund checks, Republicans noted that the state’s track record of getting relief out the door is patchy at best.
A program to support essential workers who contracted COVID has disbursed less than 2% of its funds after seven and a half months.
A second aid scheme for essential workers is hugely popular – but appears to be starting to cut grants due to a lack of funds.
And even the child tax break, the linchpin of the Democrats’ summer relief program, left $32.5 million — 26% of the estate’s $125 million budget — unclaimed.
“Christmas in August”
“This is Christmas in August,” Lamont said Wednesday as he stopped at Fleet Feet, a West Hartford athletic shoe and sporting goods store, to promote the sales tax holiday, which runs from Sunday, August 21 through Saturday, August 27. August, “It represents real savings.”
“Governor Lamont and I continually strive to find ways to make our state more affordable,” said Lt. gov. Susan Bysiewicz, who along with the Democratic nominees for Treasurer, Secretary of State and the General Assembly Thursday afternoon in Hartford, was to campaign for affordability initiatives.
The sales-tax-free week for most clothing and shoes under $100 — usually offered annually in August — is the second week Lamont and his Democrats have mandated in the majority of the Legislature this year.
The first — which saved buyers an estimated $3 million — took place in April, around the same time Democrats also suspended the state gasoline tax of 25 cents a gallon from April through June.
They would follow that up with a $660 million aid package in May, which mandated the second sales-free week in August; extended fuel tax holiday to November 30; and established a mix of one-off and ongoing tax cuts.
Alongside the child tax rebate, there was a temporary increase in aid to working poor families, an expansion of the state income tax credit that offsets local property tax bills, and the statewide freeze on vehicle tax rates dropped from $45 million to $32.46 million (a million raises $1 for each $1,000 of appraised property value).
Democrats rightly noted that this was one of the largest tax cuts in state history and was complemented by other programs to help Connecticut recover from the coronavirus.
GOP: The Democrats shared a tiny portion of the state’s windfall
Republicans, who sponsored a $1.2 billion tax break plan, argued the Democratic program fell short for a number of reasons.
About half of the tax breaks were one-offs, although the GOP also included some temporary measures.
But the main Republican objection was one of context. The national inflation rate had topped 8% by May and would top 9% early this summer. And although gas prices here have fallen to $4.09 from a high of $4.98 a gallon on June 14th the AA reported Wednesday exceeded the national average by 15 cents a gallon.
And while economic forces crushed consumers, Republicans countered, the tax breaks offered by Democrats represented only a tiny fraction of the staggering, unprecedented $4.3 billion in surplus the state government had in the June 30-ending period fiscal year enjoyed.
“When it’s ‘Christmas in August,’ they give people a bunch of bucks,” said Senate Minority Leader Kevin Kelly, R-Stratford. The Republican plan, which focused on the first income tax rate cut since 1995 and a temporary rollback in sales tax rates, is designed to bring broad-based relief that is easily accessible, Kelly said.
Programs struggle to get funds out the door
Ease of access has hardly been the hallmark of all Democratic programs this summer, Republicans argued.
The Essential Workers COVID-19 Assistance Program launched in January with $34 million to help frontline workers who have suffered lost wages or medical expenses due to the coronavirus. However, the program stalled due to a complicated application process that required workers to gather medical and employment records from two years ago.
As of Monday, the program — which was scheduled to end June 30 but has been extended to Dec. 31 — had distributed less than 2% of its funding, just about $560,000, according to Comptroller Natalie Braswell’s office, which lawmakers are cooperating with to carry out the program it had designed.
Democrats touted a second COVID relief measure, the Premium Pay Program, when it launched two weeks ago. This should bring $1,000 bonuses to frontline workers in the private sector. Sickness or loss of wages played no role. It was just a way of saying thank you.
But the governor and legislature only budgeted $30 million, meaning the program — by simple math — couldn’t provide more than 30,000 bonuses of $1,000 each.
As of Tuesday morning, the Comptroller’s office had received more than 121,000 applications for applications – four times the maximum number of $1,000 bonuses that could be awarded. And the application deadline is October 1st.
In the event that the number of approved applications exceeds demand, Lamont and the legislature have stipulated that grants will be cut proportionately. To stretch the dollars further, gas station workers and staff in soup kitchens and pantries and others were not considered essential workers.
Labor supporters warned earlier this summer that this would happen, predicting workers would receive much less than the $1,000 bounty that was dangling. As evidence, they found that Massachusetts had budgeted $500 million for a premium pay program aimed at private and public sector workers.
The child tax credit fared better, but the program still required families to apply for relief. Some tax reform advocates said a better alternative would have been to use older tax data to identify the most eligible households – and then send the aid directly without an application process.
“These programs and their poor administration are consistent with the governor’s ‘let them eat cake’ philosophy,” said Vincent J. Candelora, House Minority Leader, R-North Branford. “He doesn’t really care about the impact of these programs on people’s lives. He only cares about the headlines.”
“Reg. Lamont is primarily concerned about making a series of promises to get re-elected and he could care less about executing those programs and getting money for people who need it badly,” added Madison businessman Bob Stefanowski , the GOP gubernatorial candidate.
Democrats: GOP has a lot of criticism but few ideas
But Democrats are firing back that Republicans have been woefully silent when it comes to proposing specific relief measures for those hurt by the coronavirus pandemic.
And while the GOP points to its tax break plan in response to the pain of the pandemic, Democrats note that Republicans have never proposed a minority budget during the last legislative session.
In other words, the GOP dangled tax cuts without explaining in detail how they would pay for them — other than that the state government could easily afford it given the surplus.
“From raising the minimum wage to establishing paid family and sick leave, to driving 18 straight months of job growth and providing families with cash to help offset the cost of going back to school, Gouverneur’s good financial management has Lamont led to a discharge. Opportunity and justice for families across the state,” said Lamont campaign spokeswoman Onotse Omoyeni.
Stefanowski is the former CEO of a payday loan company whose high-interest loans are illegal in Connecticut, and Omoyeni added, “As Governor Lamont continues to deliver for families across the state, Stefanowski dreams of bankrupting them.”
Chris Collibee, spokesman for Lamont’s budget office, also noted that the governor and legislature used almost all of this year’s surplus, about $4.1 billion out of $4.3 billion, to pay off the massive pension debt that Connecticut accumulated mainly between 1939 and 2010.
That deposit, along with another $1.7 billion in excess funds that Lamont and lawmakers used to meet pension debt between 2020 and 2021, will save taxpayers an estimated $12 billion over the next 25 years.
“Make no mistake,” added Collibee, “we are making a real difference in improving the lives of families in Connecticut.”