Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

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

Index Last Change % Change
Dow 17,745.98 -5.41 -0.03%
Nasdaq 5,128.79 17.05 0.33%
S&P 500 2,108.63 0.06 0.00%
Treasuries 2.27 -0.01 -0.48%
Data as of 5:24am ET
Company Price Change % Change
Facebook Inc 95.21 -1.78 -1.84%
Bank of America Corp... 18.13 -0.03 -0.17%
Microsoft Corp 46.88 0.59 1.27%
Whole Foods Market I... 36.08 -4.74 -11.61%
Ford Motor Co 15.10 -0.11 -0.72%
Data as of Jul 30
Sponsors

Sections

Loosening state restrictions have given gun silencer sales a boost. Silencers are now legal in 41 states, compared to 37 four years ago. Also some gun makers are making it easy to attach them. More

Pinterest reveals its diversity numbers and announces how it plans to diversify its workforce. More

Fast-food chains that operate in more than 30 locations nationwide are the sole target of a new rule in New York to hike their minimum wage to $15. But consumers and small business owners, as well as some employees, may be the ones to pay the price. More

You can't blame it on the economy anymore. More Millennials now have jobs, but are still living at home. More