Tax hikes on the way for Connecticut residents

By Tami Luhby, senior writer


NEW YORK (CNNMoney) -- Connecticut residents: Get ready to pay more taxes!

Governor Dannel Malloy on Wednesday signed a $40.1 billion budget that raises taxes on sales, income, cigarettes and corporations. The budget should bring in $2.5 billion in additional levies over the next two years.

The biennial plan, which also cuts spending by $2.2 billion, depends on state employees agreeing to $2 billion in concessions between now and 2013. The governor said he could send out more than 4,000 layoff notices to the state's roughly 50,000 workers soon if a deal isn't reached.

Unlike many of his peers, Malloy chose to increase taxes, rather than dramatically cut spending to close his state's $3.3 billion budget shortfall. Only a handful of governors are proposing tax hikes this year.

Under the budget, the state sales tax will rise to 6.35% from 6%, while cigarette taxes climb to $3.40, from $3 in the new fiscal year, which starts July 1. Larger corporations will see a 20% income surcharge, replacing a current 10% surcharge.

Residents earning more than $100,000 will pay higher income taxes due to a hike in marginal rates, while those buying pricey cars, boats, jewelry and clothing will pay a 7% luxury goods tax. The state will also extract a tax on estates and gifts greater than $2 million, as opposed to the current $3.5 million threshold.

Like to hear live music in a bar? Be prepared to pay a 3% cabaret tax. Get caught speeding? You'll fork over a $15 fee, up from $10, on top of the fine.

Residents will pay sales taxes on more services, such as pet grooming, spa treatments and yoga. Clothing and footwear under $50 will be subject to tax too.

The news isn't all bad, however. A 3-cent hike in the gas tax was dropped. And the budget increases the amount of business tax credits available for job creation to $20 million, up from $11 million. It also creates a state earned income tax credit for low-wage workers. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,156.85 24.88 0.15%
Nasdaq 4,562.19 9.43 0.21%
S&P 500 2,001.57 2.59 0.13%
Treasuries 2.60 0.01 0.42%
Data as of 1:40am ET
Company Price Change % Change
Bank of America Corp... 16.77 0.06 0.36%
Apple Inc 101.58 0.72 0.71%
Yahoo! Inc 42.59 -0.12 -0.28%
Microsoft Corp 46.52 -0.24 -0.51%
Alcoa Inc 16.28 0.12 0.74%
Data as of Sep 17

Sections

Alibaba founder Jack Ma could earn as much as $867 million from his company's market debut. More

The Federal Reserve is probably not going to raise interest rates until the summer of 2015 at the earliest. More

Frederick Hutson launched Pigeon.ly in 2012 to help inmates communicate with their friends and family. He's on target for $1 million in sales this year. More

Occupy Wall Street offshoot Strike Debt says it has abolished nearly $4 million in private student loan debt for students who attended Everest College, part of Corinthian Colleges. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.