Gov. M. Jodi Rell changed the debate over the budget in dramatic fashion Wednesday by offering some tax increases, tax cuts and more reductions in spending in hopes of prodding the recalcitrant Democratic Legislature in action.

At issue is a gnawing $8 billion budget gap for the next two years. Connecticut and Pennsylvania are the only two states without a budget in place and the standoff has now gone longer than the 1991 deadlock which resulted in the state’s income tax.

First, the good news – Gov. Rell proposed $520 million in spending cuts while  eliminating the estate  tax entirely. Democrats have only offered cost shifts and phone cuts but Gov. Rell has actually eliminated programs and consolidated agencies.

The abolition of the “death tax” will be good news since it will stop some of the flight of capital out of Connecticut to states and assure some family-owned businesses that the next generation of business owners don’t have to sell their assets to cover tax debt.

Also, Gov. Rell proposed reducing the state’s sales tax from 6% to 5.5% which her office believes will generate enough economic activity to create 8,300 jobs.

Now, the bad news – Gov. Rell proposes hiking the personal income tax rate from 5.0% to 6.5% on single filers earning $500,000 and dual-filers who earn $1 million. The Governor also wants a 10 percent retroactive corporate surchage on companies earning over $100 million plus a hike in taxes on cigarettes from $2 to $3 a pack.

The House and Senate Republican have offered several budget proposals  that  offer essential services with long-range reforms - without tax increases and that would be still be the preferred way. However, the Governor wants a budget by September 1 and she was willing to sacrifece herself politically to get a budget completed.

The Democratic rank-and-file were meeting Wednesday afternoon at the State Capitol to review the Governor’s proposal. Republicans will meet tomorrow morning before both chambers meet to take up one or more proposals.

Stay tuned for details as they occur on www.everydayrepublican.com.