Thursday, December 18, 2008

Déjà vu All Over Again

It’s always worth while having a look back before stumbling forward into a precarious future.

Those who have memories will remember that moment, just before Connecticut’s state income tax became a reality, when arguments were being made in various quarters in favor of the income tax.

The pro-tax folk had three sharp arrows in their quiver.

The primary tax revenue engine, the sales tax, was said to be subject to the vagaries of the market place. In good times, the sales tax flooded state coffers with the mother’s milk of politics, money. But in bad times, the flood dwindled to a trickle, leaving legislators in the unenviable position of having to settle upon spending cut, never a bright prospect for those legislators who wish to be all things to all men. This budgetary punning was something the two most well known Democrat governors, Ella Grasso and William O’Neill, did with glum pusses. It was a time when the income tax was but a glint in former senator and governor Lowell Weicker’s eye. The last pre-income tax budget was, relatively speaking, a modest $7.5 billion, give or take half a billion. In those halcyon days of yore, it was thought prudent to cut spending to balance budgets, and the prospect of budget cuts was held over legislator’s heads like a damoclean sword to dampen their itch for spending.

It was said at the time by the pro-tax crowd that an income tax would provide “the state” – or that portion of it charged with spending money – with a more reliable revenue stream. No more sharp ups and downs; the post income tax road would be a broad straight way. Those arguing against the tax pointed out at the time that the revenue tide would ebb and flow in accordance with the prosperity, or lack of it, in the financial sector. And what do you mean, they asked at the time, by “the state?” Clearly, an income tax would settle a nasty political problem for legislators, but would it be, in the long run, a benefit for the state, i.e. people who pay taxes and create wealth? Some Connecticut voices asked such questions at the time.

The second arrow in the quiver concerned “niggling taxes.” We were all being bitten to death, said the pro-income tax crowd, by lots of small, perhaps dispensable, niggling taxes. An income tax might make it possible to dispense with these tortures.

The third arrow in the quiver was then Governor Lowell Weicker. By some weird conflation Weicker had become the state. He rode into the governorship on a promise – some might call it an intimation – that the state budget deficit would be settled without recourse to an income tax. Bill Cibes, whom Weicker chose as his Office of Policy Maintenance budget chief, ran for governor and lost on a pledge to establish an income tax. When these guys wrapped their hand around the tiller of state government, they soon set the ship of state on an income tax course. And after breaking some bones and twisting some arms, they got one.

So much for the look back. Where are we now?

We are being bitten to death by niggling little taxes, alas still with us. The income tax, as a reliable revenue stream, has flopped because the financial sector has taken a bath, and Main Street Connecticut is heavily reliant on the prosperity of Wall Street. The bottom line of the last budget was double and perhaps triple, if one takes into account state bonding, the modest numbers during the O’Neil and Grasso administrations. The income tax has consistently produced surpluses that might have been returned to “the state” – that is to say, to the people of the state from whom all good things come, including tax revenue. But governors and legislators – those people who vainly imagine they are the state – swallowed down all the surpluses, and the additional revenue hiked up successive budgetary bottom lines.

Finally, Weicker – who was to Connecticut what Oliver Cromwell was to the English Parliament – is retired, thank God for small favors; the Republican Party is a nullity, thanks to Weicker, among others; and we are awash in red ink to the tune of $6 billion, so far.

The question “Where do we go from here?” is easily answered, though getting to the future may require strenuous efforts on the part of legislators who produced this laughable mess and who never have accepted responsibility for any of it.
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