(Bloomberg) -- Connecticut lawmakers approved a $51.1 billion budget that cuts personal income-tax rates for the first time in almost 30 years, while increasing spending on education and housing.
“We are delivering the largest cut to Connecticut’s income tax rates in state history,” said Governor Ned Lamont in a press release Tuesday.
The tax cut will benefit 1 million filers, or almost 60% of all filers, according to Lamont in a press statement prior to the budget passing.
The Democrat-controlled state Senate approved the two-year budget Tuesday following the state’s Democrat-led House of Representatives vote to pass the budget in the early morning.
The income-tax cuts, capped at $150,000 for single filers and $300,000 for joint filers, reduces the rate for families to 2% on their first $20,000 in income and to 4.5% on income of as much as $100,000, down from 3% and 5%, respectively.
For single filers the new rates apply to the first $10,000 and $50,000 in income, respectively. The rate cuts along with an increase in the earned income tax credit and lower taxes on pensions and annuities, will cost the state about $460 million.
Surging stocks and Wall Street profits last year have boosted capital-gains-tax revenue, while sales-tax collections are also rising. In 2017, lawmakers passed a bill requiring the state, which is heavily reliant on Wall Street for income-tax revenue, to fill its rainy-day fund with any capital-gains and bonus taxes that exceed a certain threshold.
Connecticut projects it will start fiscal 2024, which begins on July 1, with $6.3 billion in reserve or about 28% of annual spending. State law caps the budget reserve at 15% of spending, with any excess transferred to pensions.
The budget also includes $810 million over two years to build more housing, including $100 million annually to build apartments in downtown areas close to transportation. State colleges and universities will get an additional $500 million in one-time operating support.
Meanwhile, Connecticut is cutting a subsidy to the Metropolitan Transportation Authority’s New Haven Line by about $38 million in the first year of the budget to reflect ridership decline on the commuter-rail service. Funding will be restored in the second year of the budget.
Read more: Connecticut Commuter Rail Line to NYC Faces Possible Cuts
The transit agency’s New Haven route is the busiest rail line for the MTA’s Metro-North Railroad, which connects Manhattan to its northern suburbs and transit officials have warned of possible service cuts, even during peak travel times. The MTA’s current budget includes a $267 million subsidy payment from Connecticut’s Department of Transportation to help cover some of the costs for operating the line.
(Updates story to reflect that the budget is approved in first and fourth paragraphs. Adds new quote in second paragraph.)
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