That said, let's look at some of the other big proposals:
Department of Business and Employment
Ah, a new department, risen from the ashes of Peter Ellef's DECD. The big question is whether or not it will actually be functional. The DECD wasn't.
Business Tax Credits
Rell proposed two new business tax credits:
The first is the Job Creation Tax Credit. A company that creates 50 or more new jobs will be eligible for a tax credit based on the estimated withholding tax paid by the new employees. This provides an incentive to create jobs and ties it to a new source of revenue for the state.
The other is the Displaced Worker Tax Credit. A company will be able to take a credit against their corporate tax for hiring laid-off workers who lost their jobs through no fault of their own. The skilled workers at Stop & Shop, U.S. Repeating Arms and Electric Boat, among others, deserve our best efforts to help them find new, well-paying jobs right here in Connecticut.
I usually don't like tax giveaways to corporations. It often feels like we're in a bidding war with other states to see how low we can make our taxes for corporations. It's a war a high-service state like CT can't win. However, these credits are directly tied to hiring practices, and make it easier for companies to hire more workers. This is good. If we're going to give companies tax breaks, let's do it right.
Estate Tax Elimination
Gov. Rell would also like to rid us of the estate tax:
I am seeking an immediate elimination of the so-called cliffs and a doubling of the amount of an estate that is exempt from the estate tax. I am proposing that the estate tax be phased [out] completely.
The state raked in over $130 million from the estate tax last year. 5% of an estate seems to go to the state.
I have no problem with that. I don't quite buy the line that we're driving rich people away, and that's a ton of revenue to give up. How is she going to pay for her big-ticket tax cuts and transportation plan if that revunue is lost? It should stay. Common sense.
Utility Tax Cut
While we're cutting taxes...
To help consumers, I am proposing a 25% across-the-board cut in the state’s public utilities tax beginning this July. This change will lower everyone’s electric and gas bills, saving businesses and consumers an estimated $45 million next fiscal year.
Everyone was a little stunned by the huge CL&P rate increase this year, so this seems like a way to calm everyone down.
I know it's a popular tax cut for an election year, but... how are we going to pay for it?
Department of Energy
A new Department of Energy would develop a state-wide energy policy, conduct market analysis, promote energy efficiency and new technologies, participate in proceedings before federal agencies and act as a liaison between state and local governments.
I'm ambivalent about this new department. I could see how it might come up with some innovative solutions, but then again... it could just sit there.
I am committed to retiring state debt and increasing our Rainy Day Fund. To that end, I am dedicating $85.5 million of the surplus to pre-funding two outstanding debt payments payable in 2008 and 2009.
Further, I am proposing that $335 million of the surplus be deposited into the state’s Rainy Day Fund. This represents the largest single deposit ever made and will provide us with a highest-ever balance of $940 million.
I like the idea of socking away a good portion of this money into the Rainy Day Fund (instead of, say, sending out $50 refund checks like Rowland did in 1998) and paying down the debt. What about the state teachers' retirement fund? This is a pressing obligation that should be dealt with--not ignored.
As part of my budget initiative, I am proposing to build on last year’s progress by adding another $344 million in additional transportation improvements over the next several years.
My commitment includes: Commuter Rail Service between New Haven, Hartford and Springfield, including connections between the rail lines and Bradley International Airport; $50 million for the 9.4 mile New Britain Busway that will serve twelve stations in New Britain, Newington, West Hartford and Hartford; rail station and parking improvements on the New Haven Line and Shore Line East; facility and service improvements on the New Haven Line’s Danbury, New Canaan and Waterbury branch lines; rehabilitation of forty locomotive pulled passenger coaches used on the branch lines; and improved transit connections between rail stations and employment centers.
Good. Fine. What, no Route 11? Oh, well. We should just rename the unfinished part of that corridor the Thomas J. Meskill Memorial Hiking Trail and Wilderness Preserve, for all the pavement it will ever see.
There's a lot to like here, but not too much that's particularly new or surprising (save the elimination of the car tax). I'm a bit concerned with how we're going to pay for a lot of Rell's tax cuts or credits. There was, as Dan Malloy noted, no mention of health care, although the governor has proposed a modest increase for nursing homes.
The big fight this year, then, will be over taxes. We saw that few of the governor's party stood with her on campaign finance reform. This year, they will doubtless all stand with her on her tax proposals. The Democrats could be fractured enough to pass a signifant portion of them, including the elimination of the car tax.
Rell gave a strong speech, and has placed herself in even better position for the campaign season. We'll see how much actually gets done by May.
Two polls about the State of the State will be up shortly. Vote!
Text of speech
Proposed Midterm Budget Adjustments