In a defeat for Democratic leaders, rank-and-file Democrats joined with Republicans Monday night to reject a series of tax increases, including proposals to raise the liquor tax and impose a surtax on those earning more than $1 million a year.
Republicans hailed the votes by the Finance, Revenue and Bonding Committee as a victory for common sense, but Democrats said some of the ideas may be revived as legislative leaders craft a budget plan with Republican Gov. John G. Rowland.
The committee’s Democratic co-chairmen, Rep. Anne McDonald of Stamford and Sen. Martin Looney of New Haven, had proposed the increases as a way to help close a two-year, $1 billion budget gap and restore what they called fairness to the state’s tax code.
If approved, the plans would have brought in more than $240 million a year in new tax revenue.
But the Democrat-controlled panel killed all but about $40 million in new taxes.
The so-called millionaire’s tax, which would have raised about $140 million by imposing a surtax on those earning more than $1 million a year, lost by one vote, 21-22.
And in a series of amendments — mostly sponsored by Democrats — the panel eliminated the liquor tax hike and plans to remove a host of business tax credits.
The committee voted 26-18 in favor of a bill that includes an amnesty program for delinquent taxpayers and an increase to the minimum amount corporations must pay in income tax, from $250 a year to $450. It also continues a state inheritance tax, despite a federal law phasing out the tax.
Several lawmakers compared the scaled-down tax package to Swiss cheese — because it has so many holes in it.
Rowland’s budget director, Marc Ryan, could hardly contain his glee.
“It’s a common sense rebellion by mainstream Democrats and Republicans who understand that not all tax credits (for business) are a bad thing,” said Ryan, who had railed against the Democratic proposals for weeks.