Connecticut income tax collections plunge, pushing 3-year deficit up past $5 billion

HARTFORD >> Connecticut’s income tax collections plummeted at the end of April leaving Connecticut with a gaping $5.2 billion hole in its budget for this year and the next two fiscal years.

Revenues are down about $413 million this fiscal year, and another $597 million and $865 million in fiscal year 2018 and 2019, respectively, according to the latest estimates. That means the budget hole lawmakers and Democratic Gov. Dannel P. Malloy will have to fill after depleting the $235 million rainy day fund is about $5.2 billion.

“The precipitous drop in revenue we experienced in late April creates major challenges for the state throughout the remainder of this fiscal year and into the next biennial budget we are currently working on,” Office of Policy and Management Secretary Ben Barnes, said Monday. “We need to take immediate action to reduce spending between now and June 30 to reduce our current year deficit as much as possible to prevent the need to borrow to meet expenses.”

The revenue from Connecticut’s top 100 taxpayers was down 45 percent, according to budget analysts.

The majority of the decline in the income tax receipts is from the withholding and finals portion of the tax, which is tied to capital gains and investment income. That part ended up being down 8.9 percent.

“This is the second consecutive year of negative growth in this portion of the revenue,” according to the nonpartisan Office of Fiscal Analysis.