Funds go­ing out but not com­ing in

Conn. is No.1 in taxes to D.C., but 48th in money back

The Norwalk Hour - - FRONT PAGE - By Dan Freed­man

WASH­ING­TON — With the new ad­min­is­tra­tion of Gov. Ned La­mont star­ing into the face of a $1.7 bil­lion deficit, elected of­fi­cials are likely to con­front anew a long-stand­ing re­al­ity: Con­necti­cut sends way more to Wash­ing­ton in taxes than it gets back in gov­ern­ment spend­ing.

The state al­ready ranks No. 1 in the na­tion for per capita fed­eral taxes paid, with an an­nual av­er­age of $14,671 — 52.4 per­cent higher than the na­tional av­er­age. And that ra­tio is likely to get worse when Pres­i­dent Don­ald Trump’s 2017 tax pack­age kicks in this year.

Home­own­ers and state in­come tax­pay­ers face a $10,000 cap on state in­come and prop­erty tax de­duc­tions, which had al­ways made life in a high-cost state some­what more af­ford­able. As a re­sult, Con­necti­cut will be­come more of a cash cow for the U.S. gov­ern­ment than ever be­fore.

As it stands, the sta­tis­ti­cal pic­ture of Con­necti­cut’s “bal­ance of pay­ments” — tax money out mi­nus fed­eral spend­ing in — is not a pretty one. In this cat­e­gory, the state ranks No. 48, be­hind only Mas­sachusetts and New Jersey.

La­mont and oth­ers view the im­bal­ance as partly a re­flec­tion of Con­necti­cut’s long-term state in­vest­ments in roads, bridges, schools and the like.

“We’re al­ready send­ing bil­lions more to Wash­ing­ton than we get back,” La­mont said dur­ing the cam­paign. “We’re sub­si­diz­ing all these other states that don’t in­vest in their in­fra­struc­ture the way we do.”

In Wash­ing­ton, Sen. Richard Blu­men­thal, DConn., said that in the just-be­gun 116th Con­gress, “I am urg­ing my col­leagues on both sides of the aisle to com­mit to a com­pre­hen­sive over­haul of our trans­porta­tion and in­fra­struc­ture sys­tems, and I want to see as many of those dol­lars as pos­si­ble in­vested in Con­necti­cut roads, bridges, air­ports, rails, and ports.”

High in­come, taxes

The data is drawn from an ex­haus­tive anal­y­sis by the Comptroller of New York state, which is sim­i­larly fac­ing long-term chal­lenges in evening out its fed­eral pay­ments and re­ceipts. Of­fi­cials at Con­necti­cut’s De­part­ment of Rev­enue Ser­vices and Of­fice of Fis­cal Anal­y­sis said their of­fices have done no com­pa­ra­ble study.

The New York study ranks all 50 states by a va­ri­ety of mea­sures. Among them, it breaks down the kind of tax money that heads to Wash­ing­ton — in­come, ex­cise, so­cial in­surance, es­tate and gift, cor­po­rate — and the fed­eral spend­ing that heads back out, in­clud­ing de­fense con­tracts, Medi­care, So­cial Se­cu­rity, vet­er­ans’ ben­e­fits, Med­i­caid, hous­ing and ed­u­ca­tion.

Part of the rea­son for the im­bal­ance is struc­tural, ex­perts say. With a rel­a­tively small pop­u­la­tion of 3.5 mil­lion and a me­dian house­hold in­come of $73,433 — sixth largest among the 50 states — Con­necti­cut has a higher-thanaver­age pro­por­tion of wellto-do peo­ple who pay ac­cord­ingly higher taxes.

“We have a very high qual­ity of life here,” said Joseph McGee, vice pres­i­dent for pub­lic pol­icy and pro­grams at the Busi­ness Coun­cil of Fair­field County. “While we pay a lot in taxes in Con­necti­cut, we have main­tained a high­per­form­ing econ­omy. I don’t think we’ve been pe­nal­ized for be­ing suc­cess­ful.”

As an in­dus­trial econ­omy, Con­necti­cut was a man­u­fac­tur­ing pow­er­house from the Civil War through World War II. Its blue-col­lar for­tunes be­gan to wane in the post-war world, but it made the tran­si­tion to a pri­mar­ily white-col­lar econ­omy based on in­surance, fi­nan­cial ser­vices, univer­si­ties and med­i­cal re­search.

The state is now in the midst of yet an­other tran­si­tion, to a dig­i­tal econ­omy that re­quires a new kind of worker with good math and com­puter skills.

Con­necti­cut has fared bet­ter than states in the Mid­west that have yet to re­cover from the dra­matic out­sourc­ing of fac­tory jobs in the last two decades.

But Hart­ford, Bridge­port and New Haven re­main mired in poverty, and some ex­perts main­tain that state of­fi­cials have done a poor job of min­ing the many veins of fed­eral money that might help them.

“We didn’t think it was im­por­tant; there was com­pla­cency,” said Fred Carstensen, a fi­nance pro­fes­sor at the Uni­ver­sity of Con­necti­cut School of Busi­ness.

Al­though the state’s spend­ing cap has not been in op­er­a­tion since 2015, it served as a dis­in­cen­tive to seek out fed­eral money since any (apart from trans­porta­tion money) off­set­ting in­come from Wash­ing­ton would be counted against the cap, Carstensen said.

An­other short­com­ing, Carstensen said, is the lack of a top-notch data cen­ter and gov­ern­ment em­ploy­ees ded­i­cated to con­nect­ing the dots be­tween fed­eral pots of money and state needs.

“Con­necti­cut flies blind,” he said. “How could a state so smart be so stupid?”

Play­ing de­fense

But even the harsh­est crit­ics con­sider de­fense spend­ing a bright spot.

With Blu­men­thal on the Se­nate Armed Ser­vices Com­mit­tee and Sen. Chris Mur­phy on the Se­nate Ap­pro­pri­a­tions sub­com­mit­tee on mil­i­tary con­struc­tion, the needs of the state’s de­fense in­dus­try have been well tended.

Be­cause of its high con­cen­tra­tion of de­fense con­trac­tors — Elec­tric Boat, Siko­rsky and United Tech­nolo­gies (Pratt & Whit­ney) among them — Con­necti­cut is No.4 in the na­tion in terms of U.S. gov­ern­ment pro­cure­ment, at $12.2 bil­lion in 2017.

Mur­phy, in par­tic­u­lar, has been at­ten­tive to the Navy’s sub­ma­rine base in Gro­ton and to Elec­tric Boat, one of two builders of sub­marines. His in­ter­est perked up af­ter the Navy in 2016 took him on a sub­ma­rine ride up to the Arc­tic Cir­cle.

But apart from good in­ten­tions, Blu­men­thal, Mur­phy and the state’s House del­e­ga­tion of five Democrats pales in com­par­i­son to the his­toric cham­pi­ons of “bring­ing home the ba­con.”

Chief among those was the late Sen. Robert Byrd, D-W.Va., chair­man of the Se­nate Ap­pro­pri­a­tions Com­mit­tee, who in­fused

fed­eral spend­ing into his poverty-stricken state with the force of a fire hose.

To be fair, the rules on Capi­tol Hill have changed — par­tic­u­larly those gov­ern­ing ear­marks.

Ear­marks, fed­eral fund­ing se­cre­tively slipped into leg­is­la­tion with lit­tle or no de­bate in Con­gress, took a nose­dive in 2005 af­ter rev­e­la­tions about the “Bridge to Nowhere,” a $223 mil­lion span be­tween the Alaskan town of Ketchikan and a vir­tu­ally un­in­hab­ited is­land with the area’s air­port.

Among those urg­ing the re­turn of ear­marks is Rep. Jim Himes, D-Conn., who has ar­gued that it makes lit­tle sense for Con­gress to ap­pro­pri­ate money to the ex­ec­u­tive branch and then have to beg for it to come back in the form of lo­cal­ized spend­ing.

Himes said that if ear­marks were to re­turn, his high­est pri­or­ity would be a new Con­gress Street Bridge in Bridge­port. Orig­i­nally a draw­bridge, the span across the Pe­quon­nock River got stuck in the open po­si­tion in 1997 and has never been re­placed.

Fed­eral spend­ing in Con­necti­cut ac­tu­ally has more than dou­bled in a decade. In 2009, deep in the Great Re­ces­sion, Con­necti­cut got just over $30 bil­lion in fed­eral money. In fis­cal 2018, it was $68 bil­lion.

Much of the in­crease is at­trib­ut­able to fed­er­ally fi­nanced Med­i­caid ex­pan­sion and sub­si­dies un­der the 2010 Af­ford­able Care Act — Oba­macare.

The data con­tains a few a few head-scratch­ing anom­alies. Charts on USAspend­, a gov­ern­ment clear­ing house aimed at “trans­parency” on fed­eral ex­pen­di­tures, show that in Con­necti­cut, fed­eral grants for ed­u­ca­tion, so­cial ser­vices and the like, Yale Uni­ver­sity ac­tu­ally comes in at No. 3.

As such, Yale is ahead of the state’s De­part­ment of Ed­u­ca­tion and its De­part­ment of Chil­dren and Fam­i­lies — the two main con­duits for schools and pro­grams to ad­dress do­mes­tic vi­o­lence, child abuse and ne­glect, fos­ter care and adop­tion.

Chris­tian Abra­ham / Hearst Con­necti­cut Me­dia

A Siko­rsky Black Hawk he­li­copter. Be­cause of the state’s high con­cen­tra­tion of de­fense con­trac­tors — Siko­rsky among them — Con­necti­cut is No.4 in the na­tion in terms of U.S. gov­ern­ment pro­cure­ment, at $12.2 bil­lion in 2017.

Arnold Gold / Hearst Con­necti­cut Me­dia

Yale stu­dents on the cam­pus. The uni­ver­sity ben­e­fits from a num­ber of fed­eral grants.

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