Connecticut needs to cut taxes to help our economy.  I recently joined other legislative Republicans in proposing a $120 million tax cut for small businesses and consumers.  We have also detailed spending cuts to pay for the tax cuts, including shrinking state government through an early retirement plan for state employees.

The need for a tax cut right now is clear.  With our economy in or near recession, people are hurting.  Gas and food prices are rising, and wages are stagnant.  The middle class is feeling the economic squeeze more than ever—and a tax cut now can help stimulate job creation and provide relief for our families.

Tax cuts should have two goals—putting more money in your pocket and giving more money to small businesses that create jobs.  I believe our plan does both.  Specifically, we have proposed:

• Lowering the gas tax.  Gas prices are really eating into our families disposable income—but 64 cents of every gallon is tax.  While we cannot impact the global price of oil, we can remove the taxes on gas.  Our proposal would suspend 10-cents of the state gas tax over the summer months, and repeal a currently scheduled tax increase for July.  We estimate this will return $50 million to consumers this year.
  
• Expanding the jobs creation tax credit.  My jobs tax credit that we passed last year needs to be expanded to include every job created in every company (currently it only applies to C-corps that create 10 or more jobs a year).  The tax credit is worth 60% of a new employee’s Connecticut withholding tax.  We need to expand this to help small businesses—by making it valid for any new job created and for any mom-and-pop business that creates it.
  
• Eliminating the business entity tax.  Small businesses currently pay $250 a year just to exist.  Not only does this add to a business-unfriendly environment in Connecticut, but it is real money that will help small businesses expand.  Whether buying a new printer or an extra advertising spot, small businesses will help expand the economy with the money saved from eliminating the tax.

I believe these tax cuts will help our families weather the recession, and set Connecticut up to create more jobs in the next 12-24 months.

In order to pay for these tax cuts, we have to cut spending.  We have spent a lot of time researching how to cut spending without either laying off state employees or hurting services, and have two main proposals.

First, we have proposed an early retirement plan for state employees.  We estimate about 4,200 state employees would take a package (about 9% of our workforce), but that we would only have to fill about 3,000 of these positions.  Thus, there would be two sources of savings—shrinking the size of government and replacing expensive senior employees with younger ones.  While some do not like early retirement packages, I believe they are preferable to forced layoffs and have been proven to actually save money in the long term.  We estimate we could save $100-150 million this year, and these savings would be on-going.

Second, we have identified savings in our Medicaid spending.  We have over-budgeted Medicaid for the past few years, based on faulty assumptions of usage rates—resulting in surpluses in our Medicaid spending.  By correcting these assumptions to reflect historical reality, we are able to put $70 million to tax cuts, without cutting any actual Medicaid benefits.

Our proposal would only increase state government by 3.2%-- significantly below the taxpayer-approved spending cap and the current rate of inflation.  We would return $120 million to taxpayers and small businesses without any serious impact to state services or layoffs for state employees.

My hope is that Governor Rell and the Democratic majority in the legislature will join us in reducing taxes this year.  We have a responsible plan targeted to our families and small businesses, and a well thought out plan to pay for it.  I will continue to fight for our families in Hartford, and for a budget that helps our economy get back on track.

Dan Debicella is the State Senator representing Stratford, Shelton, Monroe, and Seymour.  If you have feedback for him or want to talk about the issues, he can be reached toll-free at (800) 842-1421 or by e-mail at dan.debicella@cga.ct.gov.