Posted on June 30, 2021
Dear Friends and Neighbors,
After five months of committee hearings, public testimony, and floor debates, the 2021 legislative session adjourned at midnight on June 9, ending my first regular session as your representative. A special session was held on June 16 during which cannabis legalization and the budget implementer were passed. I’ll send a separate e-mail with my thoughts on that session and those bills.
Covered in this update are two significant bills passed during the final days of regular session: HB 6688 (the truck tax), and HB 6689.
HB 6688 – AN ACT CONCERNING A HIGHWAY USE FEE
HB 6688 passed by a vote of 88-59 in the House, and 22-14 in the Senate, with all Republicans voting “NO.” This highway use tax will charge large trucks based on their weight (26,000 pounds or more) and classification (classes 8-13) at a rate of 2.5 – 17.5 cents per mile. The tax applies to both in-state and out-of-state trucks that use Connecticut roads and highways. It is projected to raise $90 million per year for the Special Transportation Fund (STF).
The average five-axle truck is already assessed about $20,000 per year in state and federal highway fees and taxes. 24 states have implemented a similar tax, and 20 of these have since repealed it. The tax has an evasion rate of 35-53%, especially by out-of-state trucks, so in-state businesses will be disproportionately affected. In addition to paying the actual tax, a significant administrative cost is imposed on trucking companies because of the extensive record-keeping imposed. This increased cost to shipping will ultimately be passed on to consumers in the form of higher prices.
I voted in favor of four proposed amendments aimed at lessening the adverse consumer impact of HB 6688. Only the amendment to exempt trucks carrying dairy products was incorporated into the final bill. Proposed amendments to exempt all trucks carrying food products or agricultural equipment, and another to divert transportation-related sales tax revenue to the STF, all failed to gain approval.
I was deeply disappointed when this bill passed since it only reinforces Connecticut’s reputation for being a high cost state to live and to do business in. When it becomes apparent that the tax is not easily collected, I fear that it will reignite the push for road tolls. This tax goes into effect on January 1, 2023.
HB 6689 – THE BUDGET
On the next to last day of session, the legislature passed a two-year $46.6 billion budget that increases spending by 2.6% in FY22 and 3.9% in FY23, for a total of nearly $1.5 billion over that period. The budget provides stable funding to municipalities, includes an “extra” payment toward pension liabilities, and does not tap into the rainy day fund. This was largely possible thanks to an infusion of $2.6 billion of state fiscal relief funds from the federal American Rescue Plan Act (ARPA), as well as bi-partisan spending and volatility caps implemented in prior sessions.
I voted for two amendments to the budget, which failed to pass:
Although some supporters of this budget claimed that it contained no new taxes, that claim ignores the truck tax passed hours earlier. Also, a 10% corporate surcharge that was scheduled to sunset was extended another two years. Finally, ARPA funds are not projected to be part of the next budget (2023-2025), which has a projected deficit of $2.2 billion. Programs funded by ARPA in this budget will not likely be funded in the next budget.
A good budget promotes sustainable private sector economic growth, not just maintains a marginal status quo. Although Connecticut is trending in the wrong direction, we have great untapped potential that is just waiting to be unleashed by lower taxes and less regulation. Here is a snapshot of our economic status:
From U.S. News & World Report:
From WalletHub:
From The Tax Foundation
From the Fitch Ratings
By Connecticut standards, this is not a bad budget, but Connecticut standards are a bar set too low. I voted “NO” because we can do better, but hope to vote “YES” on a future budget that does promotes economic growth through lowering tax rates and shrinking government. This is the only sustainable path to a healthy economy and sustainable state government. Economic growth can result in even more revenue, despite lower tax rates. That is a win for everyone.