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Budget Veto Sends Conn. Lawmakers Back to Drawing Board

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Connecticut lawmakers went back to the drawing board last week to devise a new state budget following a veto by Gov. Lowell P. Weicker Jr. of a plan that had ignored his call for the state's first tax on personal income.

Legislative leaders convened a special session last week in hopes of fashioning a new budget proposal by the end of June.

Observers said chances were increasing that any new plan would contain some sort of personal-income levy, which the Governor and others have argued is essential to putting the state's troubled fiscal house in order.

The other option--mustering the two-thirds majorities in both chambers needed to override Mr. Weicker's veto--was generally regarded as impossible. The budget plan had passed the House by a vote of 77 to 71, and the Senate by a vote of 22 to 14.

Moreover, the bipartisan coalition of legislators opposed to the income tax appeared to come apart last week as one of its key members, Cornelius O'Leary, the Senate majority leader, signaled a willingness to compromise with the Governor by proposing an income-tax plan of his own.

"We are facing a potential deadlock," Senator O'Leary said. "I think the merit of my plan is that it has some appeal to both sides."

Budget Plan's Fairness Faulted

The vetoed budget, which called for spending of $7.7 billion, was designed to address a projected revenue shortfall of about $2.7 billion over the next 13 months.

Instead of the Governor's proposed income tax, the measure had sought to raise $960 million in new revenue by expanding taxes on sales and corporations and by creating some entirely new taxes on mortgages and other items.

"The package which the Governor vetoed was designed to put together an answer to Connecticut's budget problems based on our traditional tax plan," Mr. O'Leary said. "Connecticut is called the Land of Steady Habits, and I felt that people did not want to break into the income-tax area."

But Governor Weicker, who was elected last fall as an independent, rejected the plan as unfair to the poor and likely to hurt business in the economically struggling state.

"It is not the nearly one billion dollars in new taxes that flaws this budget," Mr. Weicker said. "Rather, it is the system of collection that does not take kindly to the tests of efficacy and fairness."

The budget plan would have required those earning $40,000 or less per year to pay progressively more in taxes, the Governor contended, while allowing those earning more than $40,000 to pay progressively less. It also would have deterred businesses enough to "make a cyclical recession chronic," he said.

In his February budget address, Mr. Weicker had called for a 6 percent tax on income in excess of $12,500 for single filers and $25,000 for those filing joint returns. (See Education Week, Feb. 27, 1991.)

To soften the impact of the income tax, Mr. Weicker proposed cutting the sales tax from 8 percent to 4.25 percent, while expanding the sales-tax base to cover such goods and services as gasoline, newspapers, clothing, and movies.

Targeting the Rich

The plan announced by Senator O'Leary in response to the Governor's veto called for a flat 9 percent tax to be imposed on income over $100,000 for joint returns or $75,000 for individuals.

"Connecticut has long been recognized as a tax haven for the very rich," said Mr. O'Leary, asserting that his new tax would raise some $800 million a year while affecting only about 125,000 high-income households.

Mr. O'Leary's measure also called for increased taxes on corporations and some mortgages.

Although Mr. O'Leary's proposal received a lukewarm reception last week, there appeared to be a growing recognition by legislators that their budget plan would have to contain an income tax in order to meet the Governor's approval.

Larry Perosino, press secretary to Speaker of the House Richard J. Balducci, praised Mr. O'Leary's proposal as "a movement in the right direction." Mr. Balducci has advocated a major overhaul of the tax system, including an income tax, and voted against the package sent to the Governor.

But, Mr. Perosino added, the final legislative package is likely to contain other new proposals and elements of income-tax plans previously proposed by the Governor and other lawmakers.

The foundation of such a plan, legislative analysts on all sides agreed, is likely to be a system of controls on state spending.

A cut in the sales-tax rate also was seen as a likely part of any plan resubmitted to Mr. Weicker.

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