Not all GOP tax proposals sound serious

I f you are lining up behind a Republican candidate in the coming gubernatorial primary because they vow to eliminate the state income tax, plan to be disappointed.

Several weeks ago, as the 2018 campaign in Connecticut got underway, we stated that “restoring fiscal stability and strong economic growth, lifting the working poor into the middle class, and assuring every child has access to a quality education” would be the top priorities guiding our assessment of the candidates.

Talk of eliminating the state income tax is an unserious but politically opportunistic move that does nothing to address these vital matters.

The candidate endorsed by the Republican Party at its state convention, Danbury Mayor Mark Boughton, has said if elected he would pursue phasing out the income tax over a decade. Businessman Bob Stefanowski, who is using a petitioning drive to get on the ballot for the Aug. 14 primary, contends he would push to do it in eight years.

Revenues from the state income tax generate just over half the money to support Connecticut’s $20.4 billion budget. And even if the state receives the income tax revenues projected under the current rates, the Office of Fiscal Analysis estimates the incoming governor will face a $2 billion deficit in the first budget he must prepare, and $2.6 billion the following year. That means the next governor would have to reduce spending by nearly 13 percent to balance the budget without any tax increase, never mind making moves toward eliminating the income tax.

Mathematically, an income tax elimination plan would require a massive increase in the sales tax, perhaps the introduction of new taxes, major cuts in municipal aid and corresponding property tax increases, and elimination of even vital state services. Practically speaking, it is not going to happen.

Vowing to phase out the income tax given the situation is a cynical play for Republican votes in the primary, but it could be an effective gambit if enough gullible voters buy it. In this five-way primary, someone could win with a little over 30 percent of the vote, and potentially less than that.

Both Stefanowski and another Republican candidate, former Trumbull First Selectman Tim Herbst, have signed the “no new taxes” pledge promulgated by the group Americans for Tax Reform. The problem with these pledges is that they strait-jacket a governor when it comes to the negotiations that will almost certainly be necessary to regain fiscal stability in the state. A small tax increase in some area could well be worth the tradeoff for labor concessions and budget cuts.

Unlike Stefanowski, however, Herbst is at least not making a pie-in-the-sky promise to eliminate the income tax. And he is open to tax reform — cutting taxes in one area but adjusting them upwards in others — as long as the result is not a net tax increase.

One proposal Herbst suggests is elimination of the estate tax, which kicks in at $2.6 million and ranges from 7.2 percent to 12 percent depending on estate size. Also suggested by the Connecticut Commission on Fiscal Stability and Economic Growth, the idea deserves serious consideration. The estate tax is expected to generate $176 million in fiscal year 2019, but it could well be helping drive millionaires from the state, resulting in much larger net revenue losses from lost income and sales taxes.

Republican gubernatorial candidate David Stemerman, a hedge fund manager, would reduce the seven-tier Connecticut income tax rate down to three, with a collective reduction in rates and a drop in the top-tier, imposed on those making $500,000 or more, from 6.99 percent to 5 percent. Though more ambitious, this also has similarities to the commission’s recommendations.

The fifth candidate in the race, businessman Steve Obsitnik, is putting his emphasis on reforming and reducing government spending, rather than tax cutting, which is arguably a more practical horse before the cart approach to gaining fiscal stability.

As they make their decisions in this summertime primary, Republican voters should consider giving greater credence to the more serious-minded proposals rather than wonderful sounding, but impractical, “I’ll make the income tax go away” promises.

Vowing to phase out the income tax given the situation is a cynical play for Republican votes in the primary, but it could be an effective gambit if enough gullible voters buy it.