Greenwich Asks Malloy Why Taxes Must Rise to Close Connecticut Budget Gap

Connecticut Governor Dannel Malloy went to Greenwich yesterday to take questions on his revenue- raising plans from residents of the town that paid the most in 2009 income taxes of any community in the state.

“Can we trust your word?” asked Peter Crumbine, 72, a former Greenwich selectman, who reminded Malloy, a Democrat, that he had promised not to impose new levies on property. The governor’s plan puts new taxes on high-priced cars and boats, and ends a $500 property-tax credit.

A statewide levy on real estate wouldn’t get his support, Malloy, 55, said. The first-term governor’s budget proposal for the fiscal year that begins in July counts on $1.5 billion from tax increases on earnings and retail sales.

Connecticut, the wealthiest U.S. state, collected $612.7 million in income taxes from Greenwich residents in 2009, or about 13 percent of the total and the most from any community, Revenue Department figures show. Merchants in the town of more than 60,000 people collected $36.1 million in sales and use taxes in 2007, or about 2.4 percent of statewide receipts.

“There is a high price associated with taxing high income earners,” said Representative Lile Gibbons, a Greenwich Republican, to cheers and whistles from the audience. As for the luxury taxes, she said that she believes they will result in lower state revenue.

Motive to Move

“What is my incentive to live here?” asked Julia Chiappetta, a small-business owner and Greenwich resident. “Why not move to Florida?” she asked, to laughter and applause in the packed auditorium at the Eastern Middle School.

“I think Greenwich is a lot nicer than Florida,” Malloy said in response. “I think Greenwich is a great place to live and I think you do, too.”

Greenwich, about 30 miles (48 kilometers) northeast of midtown Manhattan, has attracted about 100 hedge funds. It is home to industry leaders including Paul Tudor Jones, founder of Tudor Investment Corp., and Steven A. Cohen, the billionaire who runs SAC Capital Advisors LP.

In his budget plan, Malloy wants to raise the retail-sales levy to 6.25 percent from 6 percent, drop exemptions for clothing and tax services such as dog grooming, car washes and haircuts. He would also add a retail-store surcharge of 0.1 percentage point to benefit local communities.

An additional 3 percentage-point levy would be charged on sales of so-called luxury goods such as cars valued at $50,000 or more, $100,000 boats and $1,000 clothing. The increase would make the top rate for some items 9.35 percent.

‘Crushing’ Blow

“It will be crushing to Greenwich business,” Terry Betteridge, who owns Betteridge Jewelers in the town’s central retail district, said by telephone before the meeting. “I voted for him. I like him a lot. But this is crazy.”

A Quinnipiac University survey of 1,693 registered voters statewide showed 51 percent disapproved of Malloy’s handling of the budget, while 32 percent approved, according to figures released March 9. The Hamden-based school’s poll also showed that two-thirds of respondents said his plan would increase taxes too much. The telephone survey was conducted March 1-7.

“Across the state, people feel just the same way we do,” Jim Campbell, the Republican Town Committee chairman, said by telephone before the meeting. “People don’t think this is the time for big tax hikes.”

Budget Proposal

Malloy asked the Democrat-controlled Legislature on Feb. 16 to pass a $17.9 billion general-fund budget for the 12 months that begin in July and an $18.4 billion plan for the following year. To close a $3.3 billion gap projected for fiscal 2012, the governor also seeks $1 billion in savings and concessions from state workers and $758 million of spending cuts.

The governor plans 17 public meetings to gather suggestions, according to Colleen Flanagan, a spokeswoman. The Legislature in Hartford is also holding hearings on the plan.

Malloy also has proposed a more progressive income tax, currently 5 percent for joint filers with incomes of $20,000 to $1 million. The governor would increase the levy on those making $100,000 to $200,000 to 5.5 percent.

He would add five new brackets, with the tax rising to 5.75 percent for those earning as much as $400,000, 6 percent for incomes topping out at $600,000, 6.25 percent for up to $800,000 and 6.5 percent for as much as $1 million. Couples reporting more than $1 million would pay 6.7 percent.

Fur coats, bow ties and pearls dotted the Greenwich crowd.

Alfred D. Morgan, 94, a former Lehman Brothers Holdings Inc. executive who arrived with his chauffeur, came to support Malloy.

“He has to do what is, unfortunately, the necessity in this state,” Morgan said.

To contact the reporter on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net; Joel Stonington in New York at jstonington@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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