The Democratic-controlled state Senate was still debating early Tuesday morning over whether to approve Gov. Dannel P. Malloy's budget that will be the largest tax increase in state history - raising more than $1.5 billion in taxes on income, corporations, retail sales, estates, electric power plants, hospitals, alcohol, cigars, and cigarettes.
The two-year, $40.2 billion state budget increases spending by 2.14 percent in the first year and 2.32 percent in the second year.
Republicans complained that the budget proves that tax increases are too high because the increases will allow the state to generate surpluses of more than $1 billion over the next two years. But Malloy and Democrats said that money is needed to pay off debt and restore the state's now-depleted "rainy day'' fund for fiscal emergencies.
Senate President Pro Tem Donald Williams said he expects 18 to 20 Democratic votes in the 36-member Senate. Some insiders agree that it could be approved by 20 to 16 with all Republicans voting against the Democratic-written budget.
The debate started at 4:18 p.m. Monday and had stretched longer than nine hours by early Tuesday morning.
In a strict party line vote shortly before 12:30 a.m. Tuesday, the Democratic majority defeated the Republicans' no-tax-increase budget by 22 to 14.
Sen. Paul Doyle of Wethersfield is expected to vote in favor of the budget. When stopped at a traffic light Monday in his car near Hartford's Union Station, Doyle initially did not say whether he would vote for the budget. He then proceeded to drive to a second traffic light within sight of the state Capitol and was asked again. This time, Doyle said he would likely vote for the budget because the Republicans were not offering much of an alternative.
Another swing voter, Bob Duff of Norwalk, will be voting for the budget. But Democrat Gayle Slossberg of Milford was still noncommittal at about 11:30 p.m. Monday - more than 7 hours after the budget debate had started.
Malloy's budget raises taxes on more than 50 items in different categories, including charging the state's sales tax for the first time on previously tax-free items like non-prescription drugs, clothing and shoes under $50, pet grooming, automotive towing and storage, limousine rides, manicures, pedicures, repairs of small planes, and cosmetic surgery. The tax on retail sales will increase to 6.35 percent, while the maximum rate on the state income tax will increase to 6.7 percent for those with the highest income in the state.
Sen. Andrew Roraback, a Litchfield County Republican, said the Democratic budget is deeply flawed because taxes will go up on everything from hats to shoes.
"For the middle class, the message is hold onto your hat. We're going to tax you from head to toe,'' Roraback said on the Senate floor. "Nothing is sacred.''
Republicans complained bitterly that Malloy had promised bipartisan cooperation and then negotiated the budget exclusively with the Democratic majority. Malloy is "unwilling to compromise, unwilling to listen, headstrong, and not willing to be flexible,'' said House Republican leader Larry Cafero of Norwalk. "It's his way or the highway.''
Cafero's counterpart, Senate Republican leader John McKinney of Fairfield, said, "He's a tax-and-spend liberal. His rhetoric may be different, but the rhetoric is over because this budget is real.''
McKinney mocked Malloy's often-repeated statement that Connecticut is "open for business'' at a time when taxes are being increased on the profits of corporations.
"How can you be open for business when you have a 100 percent increase on the corporate surcharge?'' McKinney asked on the Senate floor. "You cannot preach and talk and scream and say we're open for business and increase the corporate surcharge. At some point, the talk is hollow and meaningless.''
But Malloy's senior adviser and chief spokesman, Roy Occhiogrosso, said Republicans are incorrect in their analysis.
"This is the most fiscally responsible governor that has been around in a long time,'' Occhiogrosso said. "This is the most fiscally responsible budget that is currently pending in the entire country.''
Senate President Pro Tem Don Williams strongly defended the budget, saying it is balanced with no borrowing and no one-time revenues. The general public, he said, does not want to see gridlock, filibusters or endless debates about the budget.
"It's refreshing that on May 2 that we are ready to go to start moving this state,'' Williams said. "We want to get on with our business right now. ... No governor in the history of this state has asked for more from our state employees. ... The reason why we have that placeholder [for $2 billion in savings and concessions from state employees in two years] is we want to keep the pressure on.''
With his voice rising to a crescendo at the end of his speech, Williams said that Malloy's budget "will put us back on the road to recovery!''
While Republicans are opposed to a wide variety of tax hikes, they say that two of the increases are particularly troublesome because they were cited in a two-page memo by Malloy's tax commissioner, Kevin B. Sullivan of West Hartford. He specifically cited the so-called Amazon tax, which would generate a projected $9.4 million per year, and the proposed sales tax on cosmetic surgery, which would generate an estimated $4.1 million.
Sullivan questioned the estimates by the legislature's nonpartisan fiscal office, which had not checked with Sullivan before publishing the numbers.
The "revenue estimates, not vetted with [Malloy's tax] department, anticipate $9.4 million in each fiscal year of the new biennium,'' Sullivan wrote in a memo to budget director Ben Barnes and copied to Occhiogrosso, who previously worked with Sullivan. "The Department understands and supports the legislative policy behind this initiative but cautions that the anticipated revenue will be uncollectable for FY 2012 and probably for [the next year] as well. In fact, the result will likely be a net revenue loss.''
Sullivan added, "No state that has passed and implemented this tax is yet collecting revenue. In all but one state where legislation has passed, remote sellers like Amazon have simply ceased doing business with in-state businesses. ... If the proposed tax is adopted in Connecticut, Amazon and probably other remote sellers like PayPal will terminate all in-state vendor relationships and seek to enjoin or otherwise challenge implementation.''
The biggest impact in the state would likely be on Clarus Marketing Group, a fast-growing Internet company that has 25 employees in Middletown and works directly with Amazon. The managing director, Vincent Villano, says that Amazon would terminate its dealings with Connecticut affiliates, prompting layoffs at his firm that operates www.freeshipping.com
Sullivan also said that the sales tax on cosmetic surgery is "substantially uncollectable'' because federal privacy regulations on medical records would prevent tax auditors from determining whether the surgery was actually for cosmetic reasons. In addition, other states that are trying to collect the tax are "experiencing significant collection challenges,'' Sullivan said.
Republicans pushed the proposal at the committee level as Roraback offered an amendment to strip out the Amazon tax and the sales tax on cosmetic surgery.
"We should not go into this with a defeatist attitude,'' said Rep. Patricia Widlitz, a Guilford Democrat who serves as the finance committee's co-chairwoman. "If we pass this policy, the commissioner will do his best to collect those. ... We're doing things that none of us are happy about doing'' in raising taxes.
"When the chief collector of the money says we can't do it, especially on the cosmetic tax, then why should we have any faith that we're going to do it?'' asked Rep. Sean Williams, the ranking House Republican member on the finance committee.
On a voice vote, Roraback's amendment at the committee level on the Amazon tax and cosmetic surgery was defeated.
In a speech later on the floor, Senator Rob Kane said that the state should tear up the state seal from the floor of the Senate. Instead, he said a new motto should be put in its place that says, "Last one out, turn off the lights.''
On the Senate floor after 9:30 p.m. Monday, McKinney delivered his most impassioned, fiery speech of the session that directly ripped Malloy and the Democrats who wrote the detailed budget. He said that Connecticut is facing the worst economy of his 47 years in the state - including the highest electricity costs in the continental United States.
"They are staring down the barrel of the largest tax increase in our state's history,'' McKinney said, adding that it was "not a moment for congratulations and back-slapping.''
McKinney charged that Malloy had gathered with top Democrats to congratulate each other in an ornate function room of the state Capitol to celebrate a one-party budget. He decried a program in which the state spends $500,000 to teach old people how to avoid slipping and falling.
"You can get a lot of clothes for under $50,'' McKinney said, adding that he cannot remember the last time that he spent more than $50 for any item of clothing for his three young children.
"Few, if any, in our state have the extraordinarily rich plans that we do,'' said McKinney, referring to the healthcare benefits for legislators and state employees. "The family, struggling to make ends meet, can't afford to go to the doctor. They go to the pharmacy. Now, we're asking them to pay more.''
Since the start of the year, the increase in the gross receipts tax on gasoline has been 6.5 cents. As such, that increase is already higher than the 3-cents-per-gallon tax increase that was dropped recently.
"How can you go on a 17-town listening tour and not understand that electricity costs are choking our cities and towns?'' McKinney asked on the Senate floor.
Stating that the Bridgeport Bluefish and the Sound Tigers are struggling to make ends meet, the cost of the product will increase because of an admissions tax, he said.
He charged that the state legislature is taking taxes out of the pockets of taxpayers and giving it "to the monster of government.''
McKinney said it is "irresponsible'' to raise taxes in order to generate a projected surplus of $1 billion over the next two years - if Connecticut collects all of the taxes as planned.
"We're losing jobs. We're not just losing jobs to South Carolina and Georgia. We're not just losing jobs to Mexico and China,'' McKinney told his colleagues after 10 p.m. Monday on the Senate floor. ''We just learned a Waterbury company is leaving to move to Armonk, New York. They have a deal with the state of New York in which they're actually going to add jobs. ... We've lost jobs to Massachusetts. We've lost jobs to Rhode Island. We've lost jobs to New York.''