Vol­un­tary 1 per­cent tax pay­ment? It could work

The News-Times - - NEWS - DAN HAAR [email protected]­medi­act.com

Here’s a re­ally bad idea that could help the bat­tered state of Connecticu­t.

You know how we need to find $1.5 bil­lion for the bud­get year that starts July 1? There’s pretty much no way to avert a tax in­crease of some sort. Even the Repub­li­cans have come up blank on bal­anc­ing the bud­get on spend­ing cuts and re­struc­tured fi­nances.

Everyone who’s looked at the bud­get, no mat­ter how con­ser­va­tive, ad­mits — if only to his or her Maker — that there’s no way to do it with­out rais­ing taxes.

And de­spite a strong move by lib­eral Democrats to in­crease taxes on the richest res­i­dents, ei­ther through higher in­come tax rates or a sur­charge on cap­i­tal gains, that plan faces op­po­si­tion even from the Demo­cratic gov­er­nor. So we’re stuck.

How about this: a vol­un­tary, 1 per­cent tax sur­charge on res­i­dents who pay the high­est state in­come tax rate of 6.99 per­cent. It’s a dumb idea that just might work.

Dumb, that is, be­cause a vol­un­tary tax is not a tax at all, and what Connecticu­t needs is a pre­dictable rev­enue stream. This won’t solve that prob­lem. Still, it might help.

I’m not talk­ing about a check-off box where the state asks tax­pay­ers to kick in a few bucks for park­land or pub­lic elec­tion fi­nances. No, I mean an or­ga­nized mar­ket­ing cam­paign to ask the high­est earn­ers in Connecticu­t to up their an­nual tax pay­ment from 6.99 per­cent of ad­justed gross rev­enue to 7.99 per­cent.

We could give them recog­ni­tion, maybe a plaque here and there, ap­plause at a news con­fer­ence, or how about this — a men­tion in the back of the state bud­get, like in the pro­grams at hos­pi­tals, sym­phonies and non­profit theaters.

We could call them the 1-of-1 Payers — 1 per­cent more from the 1 per­cent.

La­mont, who would be in that group and who works for no salary, scoffed at the idea and said, when I asked him, that no one would pay it.

He’s wrong. Some would. “If there were a for­mal pro­gram I would be more likely to say yes,” said David B. Bingham, M.D., a re­tired OB-GYN in Salem, who founded a large prac­tice in Nor­wich. “I would par­tic­i­pate, but I would be wor­ried that we wouldn’t solve the prob­lem.”

Bingham is a grand­son of Hiram Bingham III, a Connecticu­t gov­er­nor (for one day) and U.S. sen­a­tor who was the first out­sider to ex­plore Machu Picchu, and may have been a model for In­di­ana Jones. He’s also de­scended from the Tif­fany founders, but his high in­come comes from in­vest­ing money he never spent be­cause he was too busy as a Nor­wich baby doc­tor.

He was among the 10 wealthy Connecticu­t res­i­dents who signed a let­ter sent on May 14 to La­mont and the Gen­eral As­sem­bly, ask­ing for higher taxes on them and their fel­low hig­h­earn­ers. “Raise the taxes. We aren’t go­ing any­where,” the let­ter said.

That’s the crux of the de­bate. Fair Share Connecticu­t, the group that or­ga­nized the let­ter, is work­ing hard to dis­pel the myth — or the idea — that rich Connecticu­t peo­ple are ex­it­ing the state be­cause of high taxes. There’s de­mo­graphic and eco­nomic evidence they are right, but tons of anec­do­tal evidence that wealthy peo­ple are flee­ing the state.

While we’re de­bat­ing that point, the vol­un­tary tax idea could help. Bingham, who ran for U.S. Congress in 1994 un­der for­mer Gov. Lowell P. We­icker’s A Connecticu­t Party, said he’d pre­fer to see it tar­geted for a pur­pose. His hope would be property tax re­lief aimed at places with high num­bers of chil­dren, the bet­ter to boost ed­u­ca­tion.

But that raises one of the big ob­jec­tions to the vol­un­tary tax idea: Rich peo­ple al­ready di­rect their dol­lars through phi­lan­thropy, some­times in very pub­lic ways, such as the $100 mil­lion pledge for pub­lic ed­u­ca­tion by Ray and Bar­bara Dalio on April 5. A tax is a tax be­cause we the peo­ple de­cide how it’s spent.

“Phi­lan­thropy is not a sub­sti­tute for pay­ing your taxes. We should have a pro­gres­sive tax sys­tem,” said Chuck Collins, co­founder of Re­spon­si­ble Wealth and di­rec­tor of the pro­gram on in­equal­ity at the In­sti­tute for Pol­icy Stud­ies.

Collins, co-au­thor with Bill Gates Sr. of a 2003 book, Wealth and Our Com­mon­wealth, on the virtues of a strong es­tate tax, be­lieves pub­lic phi­lan­thropy — such as the bil­lion­aire who an­nounced this past week­end he would pay off all stu­dent debt of grad­u­at­ing se­niors at More­house College — is too of­ten con­fused with re­spon­si­ble tax­pay­ing.

Collins said the idea of a vol­un­tary tax could be use­ful as long as the dis­tinc­tion was clear — it’s not di­rectable phi­lan­thropy.

How much might it raise? In 2017, 35,848 fil­ers in Connecticu­t paid at the 6.99 per­cent rate, mean­ing they made more than $1 mil­lion, for joint fil­ers, or $500,000 if they filed singly, ac­cord­ing to the state Depart­ment of Rev­enue Ser­vices. Their to­tal in reg­u­lar state in­come tax was $3.34 bil­lion.

That means each percentage point ac­counts for $478 mil­lion in that group alone. If we made the 1 per­cent ask of that group, could we col­lect $50 mil­lion? Maybe $75 mil­lion?

“I love it,” said Rep. Anne Hughes, D-Eas­ton, chair of the state House Pro­gres­sive Cau­cus, the law­mak­ers push­ing for higher taxes on the rich. “Make in­vest­ing in Connecticu­t by the wealthy cool again ... make everyone want to do it to try to re­ally cre­ate some buzz.”

Hughes be­lieves a strate­gic ef­fort could help re­verse the “zero trust in gov­ern­ment” that we have now — though she knows it wouldn’t solve the state’s pen­sion prob­lems. She fa­vors a much more ag­gres­sive tax in­crease on the richest res­i­dents.

“You don’t need everyone to pay it. You need some, to start to make this a vi­able thing,” she said.

She sees “Fi­nan­cial Vic­tory Gar­dens” mod­eled af­ter the World War II ef­forts, and won­der what that would look like in the dig­i­tal age.

Oth­ers who fa­vor high taxes in the rich say the idea is ter­ri­ble. They in­clude Morris Pearl, chair of Pa­tri­otic Mil­lion­aires, an ad­vo­cacy group of wealthy peo­ple. The whole idea ob­fus­cates the con­cept of pro­gres­sive tax pol­icy, Pearl told me — and would un­der­mine the very prin­ci­ples be­hind a push for a fair so­ci­ety with­out un­due in­flu­ence by the rich.

David Pickus, the re­cently re­tired pres­i­dent of SEIU Dis­trict 1199 — and a proud non­mem­ber of any wealthy tax­payer groups — thinks a vol­un­tary tax is a lousy idea that wouldn’t fly. “Taxes are a cost of hav­ing a so­ci­ety,” he said.

La­mont prefers the phi­lan­thropy model. “I heard from a lot of guys, ‘Don’t in­crease the tax rate, I don’t want it nec­es­sar­ily to go to state gov­ern­ment any­more, but I’m will­ing to con­trib­ute to the state of Connecticu­t ... that’s why I’m will­ing to do things through con­tri­bu­tions.’ ”

How about just ask­ing for an ex­tra 1 per­cent? Would peo­ple do it? “Nope,” La­mont said, laugh­ing.

“I don’t think you’d have many tak­ers,” said Tony Cirone, prin­ci­pal at Cirone Fried­berg, a tax, ac­count­ing and con­sult­ing firm with more than 100 pro­fes­sion­als in Fair­field County.

But Hughes, the Eas­ton Demo­crat, sees the idea as part of a new way of thinking around com­mu­nity, rather than in­di­vid­ual ac­com­plish­ment. “We’re say­ing, be trend­set­ters, dammit . ... Peo­ple want to live in a com­mu­nity that has con­nec­tions.”

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