2021 Connecticut Tax Developments

CANNANNEW REPORT

30 July 2021 by Louis B. Schatz (Hartford) , Alan E. Lieberman (Hartford), David O. Bigger (Hartford) and Raymond J. Casella (Hartford) Shipman & Goodwin LLP Opportunity Lost?The New State Biennial Budget Connecticut adopted a $46.4 billion budget for the two-year period that commenced July 1, 2021, reflecting a 2.6% spending increase for the first year and a 3.9% spending increase for the second year.There is much to love and hate about the budget regardless of your political persuasion, leaving many to wonder whether the state missed the opportunity to make more significant structural changes at a time when its economy is rebounding and its rainy day fund is at capacity. On the positive side, latest projections from the Office of Policy and Management indicate that the state finished the 2021 fiscal year with a projected surplus in excess of $271 million, and the balance in the state’s budget reserve fund (the “rainy day fund”) has grown to its statutory cap of 15% of General Fund expenditures or just over $3 billion.This freed up over $1 billion to be applied to Connecticut’s massive long-term pension debt.The new biennial budget fortunately does not touch the rainy day fund, projects a $2.3 billion surplus and should allow for additional, future payments to be made to the two state pension plans.Money was deposited into Connecticut’s unemployment trust, but not in an amount that would fully address the significant state borrowing that has occurred since the start of the coronavirus pandemic. Although progressives in the General Assembly worked hard to increase taxes on businesses and higher-income individuals, Governor Lamont held the line on most tax increases.While the opportunity to make more meaningful tax law changes to boost the economy was missed, the General Assembly did enact tax legislation for the benefit of individuals, such as remote worker relief for 2020 and the…

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