Funds going out but not coming in
Conn. is No.1 in taxes to D.C., but 48th in money back
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?”
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 USAspending.gov, 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.
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.
Yale students on the campus. The university benefits from a number of federal grants.