HARTFORD – Gov. Dannel P. Malloy on Monday reported payments of estimated income taxes in December and January will exceed his administration’s projections by more than $900 million.
The announcement possibly represents some good news after the state comptroller’s office reported last week that this year’s $20.4 billion budget is $224 million out of balance.
Yet, a so-called volatility cap that the legislature approved as part of the two-year, $41.3 billion budget limits how much of this windfall is available to reduce the projected deficit.
State law now requires that any revenue from estimated and final income tax payments in excess of $3.15 billion be diverted to the budget reserve fund.
Based on the cap, the Malloy administration estimates only $10 million of any increased collections can be used to offset any budget deficit for the current 2018 fiscal year.
The final payments from taxpayers who pay estimated income taxes four times a year are due Jan. 15, and estimated and final payments represent 35 to 40 percent of income tax receipts.
Also, wealthier taxpayers who pay a significant share of income taxes often use this payment method.
“This is very promising news for the state,” Malloy said.
Typically, the largest collections of estimated and final payments occur during December and early January.
The governor’s office said the payments include normal estimated payments, one-time payments based on repatriation of foreign profits in advance of a Dec. 31 federal deadline, and accelerated payments that would normally have been received later in January or in April 2018 in order to avoid the new federal cap on state and local tax deductions that began on January 1.
In December, the Malloy administration reported estimated and final payments were down 6 percent from the same time last year.
At that time, the state Office of Policy and Management advised that $2.8 billion in budgeted estimated and final payments were outstanding, or 80 percent of the anticipated receipts.
Overall, the 2018 budget assumes nearly $9.2 billion in income taxes, the single largest source of state funding.
In the 2017 fiscal year, estimated and final payments dropped 7.8 percent compared to the previous fiscal year. The state collected more than $3.1 billion in estimated and final payments, and more than $5.8 billion in withholding taxes
