The Register Citizen (Torrington, CT)
Tax relief solutions available that bypass tolls and marijuana
It seems that since Gov. Ned Lamont’s election you can’t pick up a newspaper, listen to talk radio or turn on the television without hearing about installing tolls for trucks or legalizing marijuana in Connecticut.
Both proposals are thought to be panaceas to the state’s financial woes, but whether alone or together, I promise with near certainty that neither will have the impact that legislators believe they will. And if you throw in the possible tax increases that also are being floated, Connecticut residents could be in for a lot of pain with little to no significant relief.
So, as we embark on a New Year, I come with some recommendations for Connecticut. They involve modernizing and optimizing current revenue streams that other states have adopted and eliminating wasteful spending that our auditors have already identified. These suggestions would generate at least $1 billion, and cause fewer headaches.
Modernize the lottery — Additional annual revenue of up to $300 million can be realized by modernizing our state lottery system, because it has been stagnant and needs upgrading. As such, we should begin accepting credit cards on certain products and upgrade the packaging of our lottery program. Connecticut receives approximately $300 million per year from the lottery, from an average $300 per year spent per resident. Our neighbor states that accept credit cards, including Rhode Island and Massachusetts, generate $500 and $700 per resident, respectively. In addition to credit cards, Massachusetts also has season passes that are very popular, and as a result, drive more revenue than any other state.
Eliminate up to $1 billion of wasteful spending — Recent reports from state auditors detail lax spending controls, waste, unnecessary bureaucracy and hazy ethics in multiple state agencies at a time when the belt should be tightened to the last notch. Here are just some of the findings in agency audit reports: Benefit payments to dead people, abuse of overtime, abuse of comp and vacation time, unauthorized rehiring of retired state employees and massive financial reporting errors. Our state government is severely mismanaged, and through tightening up of our procedures and eliminating waste, we can save at least $1 billion annually. By seeking just a 3 percent reduction in overall operating expenses in the next budget, Connecticut could close its fiscal gap by approximately $1 billion annually, according to the Connecticut Commission on Fiscal Stability and Economic Growth.
Unlock unclaimed money — In 2017, there were $176 billion in gift cards sold in the United States. But what happens to the remaining funds after such a card is deemed abandoned? Connecticut needs “escheat” laws to reclaim those funds, much like Delaware currently has in place. We need legislation to require the names and addresses of the gift cards, so when they are sold, we can gain that revenue for our state. Gift cards are appealing because it is almost impossible to determine the rightful owner of a gift. That means that the state will ultimately end up permanently retaining a much higher portion of gift card funds than of other forms of unclaimed property.
But we shouldn’t stop there. New Jersey has brought in several billion dollars of revenue through gathering unclaimed funds. By collecting these unclaimed funds, we can generate additional annual revenues of up to $250 million for the state treasury. Last year, we brought in approximately half that amount. Connecticut needs to do better in this regard.
While tolls and taxing marijuana might sound sexier than the proposals outlined above, remember that my suggestions are designed to cause as little pain to the Connecticut taxpayer as possible.
Lamont wants tolls for trucks coming into Connecticut, estimating that they would generate $300 million a year. But as some state leaders have asked, where is that figure coming from? Connecticut removed its border tolls in 1983 and in exchange the federal government agreed to fund more transportation infrastructure costs in order to maintain interstates like I-84 and I-95. We received $528 million from the federal government in 2018 vs. New York and Massachusetts, which have received less than 50 percent per person because they have tolls. So not only will that $300 million figure likely fall short, we can almost certainly expect a court challenge if we only require trucks to pay tolls.
And honestly, do you think the Legislature and the governor will stop at only requiring trucks to pay tolls? How long will it take before they push for across-the-board tolls for everyone?
As for marijuana, the state appears to be barreling down the road toward legalizing recreational marijuana, like Colorado or, more recently, Massachusetts.
The Connecticut Office of Fiscal Analysis estimated that the state could eventually generate about $100 million from taxes and licensing fees if it legalizes the drug.
Colorado was first to embrace legalizing recreational marijuana, and as a result, it had significant demand because of marijuana tourism, which has now stabilized. They taxed it at 30 percent while other states are now taxing cannabis at about 10 percent. As a result, Colorado made approximately $200 million in 2017, a state with double the population of Connecticut.
With so many fewer people, and with a rapidly maturing market, Connecticut would be lucky to generate a third of the $100 million the state analysts think. Guess how much towns would make? Less than 5 percent of the tax revenue.