A package of tax changes, including a plan to prevent 110,000 Connecticut commuters with out-of-state jobs from being double-taxed because they've been working at home during the pandemic, received final legislative approval on Monday.
The bill, which also includes provisions to help welfare recipients with liens on their properties and to steer more funding to communities with non-taxable property cleared the Senate by a bipartisan vote of 28-7. The legislation, which already passed in the House of Representatives, now awaits Democratic Gov. Ned Lamont's signature.
Supporters of the bill, including senators in the western portion of the state, said it was unfair that many of their constituents who work in New York faced the prospect of having to pay both Connecticut and New York income tax when they were working from home during the pandemic. The issue also affects Connecticut residents who work in neighboring Massachusetts.
“These commuters have not benefited from New York services over the last year,” said Sen. Will Haskell, D-Westport, noting that many have “not stepped foot” in New York since many employers told workers to stay home. Haskell said it was “outrageous” for New York to interpret a so-called “convenience rule” as allowing the state to still collect personal income tax from these workers who had no choice but work from home.
“This is an opportunity, and in fact, I think we have an obligation to stand up to bullies, whether they be in New York or in Massachusetts,” Haskell said.
Under the bill, the state of Connecticut would provide those workers with a credit for income taxes owed to Connecticut during just the 2020 tax year, even though they worked remotely from home during the pandemic.
The underlying issue is ultimately expected to be decided by the U.S. Supreme Court. Connecticut and other states have filed briefs in the case, which stems from New Hampshire filling suit against Massachusetts for collecting income taxes on residents who were working from home during the pandemic.
Sen. Craig Miner, R-Litchfield, said Connecticut should do more, claiming “the biggest bully is in New York and he should be taken on," without referencing New York Gov. Andrew Cuomo by name. Last May, the Democrat said his state was “not in a position to provide any subsidies” given its budget deficit when he confirmed that out-of-state health care workers who came to New York to help with COVID-19 patients would be taxed.
Miner also raised concerns about another provision in the bill that would boost state funding for Connecticut cities by making changes to the payment in lieu of taxes program for property exempt from local property taxes, such as hospitals, colleges and state-owned properties. He noted how an agreement has not yet been reached on how to balance the next two-year state budget.
The concept, first proposed by Senate President Pro Tem Martin Looney, D-New Haven, last month, creates three tiers of municipalities for new, minimum state PILOT grants. The General Assembly would need to appropriate at least $143 million in additional state revenue every year to fully implement the new plan, something some Republicans questioned would actually happen.
There was bipartisan support for a provision in the bill that would end the requirement forcing welfare recipients to pay back a portion of the government aid they received if they receive through a lien placed on their property. When the bill passed the House, Lamont said the legislation “removes a barrier to financial success” by repealing liens on the property of public assistance recipients and ultimately giving all families across Connecticut “a fair shot at success."
He's expected to sign the tax package into law.