Federation of Connecticut Taxpayer Organizations

HARTFORD � Connecticut�s wealthiest residents could end up contributing much less in taxes than expected under Gov. M. Jodi Rell�s budget proposal, if legislative analysts are correct.

That�s because the nonpartisan Office of Fiscal Analysis reported Thursday that the administration overestimated by $371 million how much revenue her newest tax plan would raise.

But a spokesman for Rell�s chief budget agency responded that OFA is being overly conservative, and the two agencies began meeting late Thursday to try to reconcile their forecasts.

The governor, a Republican, on Wednesday shocked the Democrat-controlled General Assembly when she ended her longtime opposition to higher income tax rates on the wealthy.

Rell proposed a rate of 6.5 percent on income in excess of $1 million for couples and $500,000 for individuals. Most income in Connecticut currently is taxed at 5 percent in a largely flat system.

According to the administration, that proposal would raise about $410 million per year. But Rell also set three conditions for supporting a higher income tax rate on the wealthy:

� $520 million in cuts from the last Democratic budget proposal.

� Reduction of the sales tax from 6 percent to 5.5 percent.

� And elimination of the estate tax, which only is levied against estates worth $2 million or more.

That last change, involving the estate tax, would save those households $177 million per year, according to the administration.

Once the estate tax cut is figured against the proposed income tax gain, it leaves the state with a net gain of $243 million.

But legislative analysts also concluded Thursday that Rell�s forecasts on the income and the sales taxes are off by about $106 million a year.

With these taxes and other revenue sources combined, OFA says, the administration is off by $371 million over the two years.

If OFA�s $106 million per year assessment is correct, that potentially lowers the wealthiest households� contribution from $243 million per year to $137 million.

That�s less than the $520 million in cuts over two years that Rell ordered, which come to an average of $260 million per year. And those are cuts that Democrats say likely would fall hardest either on poor or middle-income families.

Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn, said that while he�s concerned about a potential shortfall in the hundreds of millions of dollars, �We still believe the governor�s proposal helps us to solve the budget crisis, but obviously it is not a complete proposal. I want to work with the governor.�

Jeffrey R. Beckham, spokesman for the Office of Policy and Management, Rell�s chief budget agency, said the administration thinks its numbers are solid, but has begun meeting with legislative analysts.

�We believe it is a conservative estimate,� Beckham said, noting the Dow Jones Industrial Average, a key economic indicator, is up more than 40 percent since March.