Connecticut Governor Pushes Tax Cuts for Teachers' Pensions

February 3, 2014

Facing a budget surplus, an economy on the rebound and an election year, Gov. Dannel P. Malloy on Friday announced a two-year plan that would cut in half the amount of pension income on which retired teachers pay taxes and offer several other tax cuts at a cost of $228 million in the next fiscal year.

The governor's office said the plan - which includes $155 million in tax rebates the governor proposed Thursday and $171 million in tax cuts already scheduled to take effect - would amount to nearly $450 million in tax relief over the next two years, if approved by the legislature in the upcoming session that opens Wednesday.

Malloy described the plan as a "modest, responsible way to begin reducing the tax burden on Connecticut residents," who he said Thursday "pay too much in taxes."

Along with the teacher pension tax break, Malloy's proposal would exempt municipalities from a tax on insurance premiums, extend a tax credit that encourages start-up investment and implement a two-day state park fee holiday.

The governor also backed a sales tax exemption for non-prescription medications that Republicans in the House of Representatives proposed last week when they released a plan for how to spend the state budget surplus. Malloy would use the surplus to pay for a one-time tax rebate, and will include the other cuts in his budget proposal.

Connecticut is one of only a handful of states that taxes pensions, and Malloy's plan for the retired teachers would exempt 25 percent of their pensions from the state income tax in 2014, and 50 percent each year after that. The proposal would benefit an estimated 23,000 retirees in Connecticut, but retired teachers who have left the state would not be eligible for the tax break.

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