Governor M. Jodi Rell today announced that updated consensus revenue projections for the current and near-term budget years – while lower than the estimates used by the Legislature in writing the budget that took effect in September – are still high enough to trigger a cut in the state sales tax that she offered during budget negotiations.
“The planned sales tax cut that I proposed (from 6 percent to 5.5 percent) will be much-needed relief for Connecticut’s hard-pressed consumers and will help spark hundreds of millions of dollars in new retail activity for our businesses and hundreds of new jobs for residents,” Governor Rell said. “The global economic slump continues to take a terrible toll on families and employers in our state. Far too many people are still wondering about the future of their job, their ability to keep their home or the state of their retirement accounts. Any step we can take to spur the economy is worth taking.”
Governor Rell said her budget agency – the Office of Policy and Management (OPM) – met with officials from the General Assembly’s Office of Fiscal Analysis (OFA) as required under a new consensus forecasting law and agreed that revenues for Fiscal Year 2010 and FY2011 are likely to be lower than originally anticipated in each year. The newest projected overall revenue figure for FY2010 is about $17.37 billion, a decline of $168.4 million or 0.97 percent from the figure used in the September budget. The updated figure for FY2011 is $17.2 billion, down $164.1 million or 0.93 percent.
Apart from the projected decline in revenue from the sales tax, the economic crisis continues to put pressure on other areas such as casino slot machine revenue, personal income taxes and cigarette taxes.
In each year, gross tax receipts are projected to decline – by $96.5 million, or 0.8 percent, in FY2010 and by $76.4 million, or 0.64 percent, in FY2011.
The September budget, while not signed into law by Governor Rell, did include a provision she called for that would lower the current state sales tax of 6 percent to 5.5 percent on January 1, 2010. However, the Legislature added a “tripwire” mechanism to the proposal, preventing the sales tax cut from taking effect if gross tax receipts were projected by the state Comptroller to fall by 1 percent or more.
If the Comptroller agrees with the updated projections from OPM and OFA, that tripwire will not take effect.
“I firmly believe consumers and retailers in Connecticut need – and more importantly, deserve – a break on the sales tax,” Governor Rell said. “With other taxes and the costs of maintaining a home and family steadily increasing, this is a promise of relief that we cannot afford to break.”
