Gov. Ned Lamont will propose a $200-per-person election-year tax rebate Wednesday when he recommends his budget adjustments to legislators and delivers a State of the State address framing his goals for the 2026 session and messaging for his reelection campaign, sources close to the administration said Monday. The plan, which would direct $200 to individuals earning less than $200,000 per year and $400 to couples making less than $400,000, would be an element of the Democratic governor’s bid to win a third term this November. The administration expects 2.2 million residents will benefit from the one-time rebate. And though the $500 million rebate technically would be paid out of Connecticut’s sales tax receipts, which support nearly $5.3 billion out of a $24 billion General Fund, the giveback would not force deep cuts to the state budget. The governor would replenish those lost dollars by temporarily adjusting a controversial savings program expected to capture more than $1.8 billion this year. Lamont, who delivered a state income tax rate cut in 2023 that benefitted lower- and middle-income residents, is expected to cast his plan as a counter to rising electric costs and inflation spikes driven by a number of factors, including President Donald Trump’s tariffs. “At the end of the day, I want families, their children and grandchildren to be able to stay in Connecticut,” Lamont told the Connecticut Mirror last week in reference to his overall budget plan. “We have already done a lot over the past seven years and look to build on that progress.” The rebate would be geared to a similar demographic as the tax cut without the long-term impact of a permanent change to tax rates. Tapping CT’s coffers for an election-year assist? But the governor’s plan likely will draw some criticism from Democrats and Republicans alike, if for different reasons. The fiscally moderate Lamont has frustrated many of his fellow Democrats in the legislature’s majority in recent years by his reluctance to ease budget caps to permit greater spending on social services, health care, education, municipal aid and other core programs. The savings program he would tap to facilitate his sales-tax rebate captures a portion of state income and business tax receipts and uses those funds chiefly to reduce the state’s hefty pension debt, which still exceeds $33 billion. The Connecticut Conference of Municipalities last March launched an online ad campaign attacking Lamont for not doing more to ease property tax burdens. Though grants to towns, on paper, have risen since he took office in 2019, CCM estimates education funding alone, once adjusted for inflation, has declined by more than $400 million. And progressives also criticized Lamont in November for waiting until one week after food stamp benefits from Washington had expired — due to a temporary federal government shutdown — before agreeing to revive the assistance using state dollars. This would have cost about $72 million per month. Instead, Lamont initially response by giving $3 million to bolster food pantries, despite warnings from industry leaders that their efforts could mitigate only about an eighth of the problems created by the suspension of federal nutrition assistance. Lamont did compromise with legislators last year, agreeing to work outside of the budget caps to create a new $300 million endowment to increase affordable child care. That program also is slated to share in future state surpluses to increase its scope. The governor also accepted a legislative plan to work outside budget caps last spring to boost special education aid to local K-12 districts by $40 million, and he agreed with legislators to create a $500 million contingency fund to cope with federal cuts under the Trump administration. Still, his rebate plan could draw opposition from minority Republicans in the legislature. While they share Lamont’s reluctance to ease budget caps to expand spending, the GOP has called for ongoing tax cuts, not one-time assistance, for Connecticut’s middle class. Tax rebates have a checkered past None of the pushback he can gets over the rebate plan would be unusual. Most of Connecticut’s rebate proposals have sparked considerable debate. Lamont has avoided at least one mistake that plagued former Gov. John G. Rowland, a Republican who shared power with a Democratic legislature. When Rowland and the 1998 General Assembly launched the first tax rebate program in state history, just over $100 million in income tax receipts were sent back to residents, with $50 going to individuals and $100 to couples. The rebate proved popular in the polls, and Rowland sailed to easy reelection that November. But many taxpayers grumbled the following spring when they learned they had to pay federal income taxes on their state tax rebate. By proposing to rebate sales taxes, instead of income taxes, Lamont would spare nearly all recipients from having to share about 22%-to-32% of their bonus with the federal government. Gov. Dannel P. Malloy dangled a $55-per-person rebate proposal before voters in January 2014, the start of his campaign for reelection, but had to pull it off the table three months later as state budget revenues plunged. Lamont did not propose the tax rebate granted to middle-income families with children in 2022, but he ultimately signed it into law. That one-time giveback of $250 per child was designed to test public support for an ongoing state income tax credit for families. Lamont to cite high energy costs in defense of rebate The governor has said frequently in recent appearances that his new budget would help residents with challenges that make life more unaffordable. Connecticut has long been saddled with some of the highest electricity rates in the nation, often falling only behind other New England states, along with California and Hawaii.  In the latest report from Choose Energy, Connecticut ranked third-highest among all states with rates of more than 31 cents a kilowatt hour. For a standard customer using over 700 kilowatt hours a month, that would mean a bill of roughly $221. Lamont and lawmakers attempted to provide some relief last year when they approved a bipartisan bill that leaders predicted would save customers roughly $100 a year. Much of those savings came from the state borrowing money to offset some of the cost of what’s known as the public benefits charge — a collection of state-mandated programs and policies that are paid through customers’ bills.  Those savings were quickly dissipated, however, by higher winter supply costs as well as a rate hike for United Illuminating customers that went into effect Nov. 1. Other elements of the bill that were supposed to save customers money, such as allowing the utilities to securitize storm costs, have yet to take effect.  Republicans want to provide even greater savings by eliminating the pubic benefits charge entirely and shifting the cost of those programs onto the state budget — or getting rid of them. One of the three Republicans vying for their party’s gubernatorial nomination, Sen. Ryan Fazio of Greenwich, proposed exactly that in a press conference Monday morning. Lamont has repeatedly balked at such suggestions, pointing to estimated $1 billion in annual costs.  “There’s no such thing as a free lunch,” Lamont said at Connecticut Business and Industry Association summit last week, where he first floated the idea of a rebate. “I want to get rid of the bill, but you’ve got to understand that the public benefit charge is how we pay for nuclear power and solar power and wind power.” ...read more read less