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State Comptroller Nancy Wyman today projected that the year-end budget surplus will reach a record-setting $405 million, and called for the majority of it to be given back to taxpayers through an income tax rebate and a tax credit for the working poor.
Wyman's surplus estimate is $102 million higher than last month's projection, mainly due to extraordinary revenue growth produced by the thriving economy. Receipts from the income tax are expected to total $3.5 billion, contributing 75 percent of the surplus for the fiscal year.
The other major sources of the surplus are the sales tax and inheritance tax, which have brought in $2.7 billion and $193 million, respectively.
"This enormous surplus was built by the hardworking taxpayers of this state, not by reduced spending by state government. Most of this money should go back to the taxpayers through rebates and tax credits. The government should not be using the surplus to expand spending that cannot be sustained as the economy slows."
Wyman's proposed rebate plan would fill the state's emergency Rainy Day Fund, and return 90 percent of the remaining surplus to income taxpayers. The remaining 10 percent of the surplus would be used to reduce the state's debt.
Wyman said that the benefits of the growing surplus should also be extended to lower-wage families who are exempt from the income tax but spend a disproportionate share of their incomes in sales and property taxes. She urged lawmakers to pass a proposed earned income tax credit that would pay lower-wage families up to a maximum of $375 a year.
"An earned income tax credit is a fair and equitable way to reward these lower-wage taxpayers for their contribution to the surplus," Wyman said. "We are all shareholders in our state government, regardless of income, and we should all share in the benefits of these good economic times."
The state earned income tax credit - now being considered by the legislature - would represent about 10 percent of what a family would receive from the federal earned income tax credit, enacted in 1975.
Wyman said she also supports the plan as an economically sound way to keep people employed and off welfare.
"This tax credit encourages and rewards people who moved from welfare to work," Wyman said. "An expanding workforce is vital to Connecticut's continuing prosperity, and this program can be part of an effective welfare reform strategy."
Ten other states, including Massachusetts, Rhode Island, Vermont and New York, also have state earned income tax credits.
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For Immediate Release
April 29, 1998
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