The Register Citizen (Torrington, CT)
Making the case for revenue
I’m concerned about the state of Connecticut’s Democratic Party. Rather than remaining united on issues, our conflicting viewpoints have created a divide within the party. This division has clouded our vision for the future.
Recently, Kevin Sullivan, commissioner of revenue services, stated, “Tax the rich is a nice sound bite, but in the end, if there are less rich to pay, it is the ones in the middle who wind up paying more.”
Even more recently the governor stated, “It is a very clear statement by the leaders of state of Connecticut that they don’t support taking appropriate steps to bring our spending into alignment with the monies that we have.”
A recent report published by the Economic Policy Institute states our wildly undertaxed wealthy is largely responsible for our budget woes. While critics are quick to point out that losing our wealthy would devastate our economy, they can’t refer to a single, objective measure showing that this is actually happening. Meanwhile, earners under $75,000 pay at minimum 15 percent in state and local taxes — earners over $165,000 pay at most 8 percent. This is not equitable.
We are losing residents, yet we are becoming wealthier — maintaining our status as first in the country for per capita income. Numerous studies have also been published recently showing that tax rates have virtually no effect on millionaire migration. We do not have a problem of the wealthy leaving. Connecticut is a place where you can become rich.
There is a strong argument against raising revenue: Waste in government. There is no defending the stodgy, bureaucratic nightmare of state government with a staff to manager ratio of 3 to 1. The ratio of staff to managers in my business is closer to 8 to 1. We absolutely need more efficiency, but not every agency is bloated and our current deficit simply cannot be tackled by cuts alone.
We have 17 percent fewer state employees than 8 years ago. Our expenditures have just barely kept up with the rate of inflation over the past decade. The budget crisis has little to do with the size of government. It is an issue of decades’ worth of debt coming due.
The governor’s decision to fully fund our pension obligations added $1.3 billion to our budget. This was a painful and precarious move. It was also fiscally prudent.
I expressed my frustration to some colleagues regarding the use of rosy projections when creating a budget. If I did that in my own business, I wouldn’t still be in business.
When I made this point, our deficit was sitting at $1.7 billion, and I posited that we should be treating our shortfall as a $2.2 billion problem. Two weeks later, my nightmare scenario became reality. We need to ensure that we have realistic revenue proposals included in the budget, so we can avoid perpetual shortfalls.
There are various avenues for revenue:
Taxing sugary beverages is expected to bring in $85 million.
Each half-percent increase on our millionaires is projected to increase revenue by $200 million.
Legalizing and regulating marijuana is predicted to add $50 million in revenue.
Reforming property tax — a statewide tax rate to fund public education — could help completely overhaul the most regressive tax structure in Connecticut. (Greenwich has a tax rate of 11.2 mills, while Hartford is 74.3 mills.)
Widening the sales tax base to include services such as attorney and accountant fees, while reducing the sales tax to 5.35 percent, is estimated to bring in more than $700 million.
Implementing electronic tolls could generate billions of dollars over the next decade.
Revenue is not the only solution, but it must be a significant tool in our toolbox. We cannot fudge the numbers by estimating high on the revenue side and low on the cost side.
Getting a budget to work with bad numbers is something that I will not and cannot support. Cuts, concessions and cost shifting may have a literary ring to it, but it is a fiscally irresponsible way to run the state. The ramifications of this path will have devastating effects on the middle class and the working poor — those who are already struggling to make ends meet.
The state unions know that this is yet another year of reckoning. They are demoralized and are losing the narrative. Seven hundred million in union concessions still leaves a $1.6 billion hole, though. I don’t want to see tax raises or layoffs. I would rather be serving in the pre-2008 economy when revenue was abundant and we could increase services at a whim.
While I advocate for more revenue, I’m also quite aware that there is no such thing as a panacea, and tax increases alone won’t cut it. Cuts and layoffs are also coming. But we do need real revenue options. We also need to be honest and conservative with our numbers so we are not dealing with a crisis every year for the next decade.