Sunday, March 04, 2012

Huey Donovan

"We can tax the millionaires in Washington and we can make Connecticut a better place for working families” – 5th District Democratic U.S. House candidate Chris Donovan

"Don't tax you, don't tax me. Tax the guy behind the tree"—Russell Long

Even the most progressive politician of his day, Russell’s father Huey Long, knew the scheme wouldn’t work; but it was a winner as a populist campaign pitch. Within the Democratic Party of his day, Russell was acknowledged as an authority on tax law. As such, he became an ardent advocate of tax breaks for business. “I have become convinced,” said Russell, most certainly not a chip off his father’s progressive block, “you're going to have to have capital if you're going to have capitalism."

One suspects that progressive leader of the state House of Representatives Chris Donovan knows this. However, the deathless scheme, endemic in the Democratic Party, to convince the tax paying public that someone may be found – perhaps hiding behind a tree in Washington – to pay debts incurred by reckless politicians marches on and on and on.

Even Governor Dannel Malloy, who styles himself a progressive, focused in his first budget on broadening the tax base. A revenue stream that depends chiefly on the ups and downs of Wall Street fed millionaires, a great number of whom in Connecticut are hedge fund managers, is doomed to fail. There are, in Connecticut and the nation, too few millionaires chasing too many debts.

Mr. Donovan is one of three Democrats vying for the seat in the U.S. House of Representatives soon to be left vacant by U.S. Rep. Chris Murphy, who has set his sights on U.S. Senator Joe Lieberman’s soon to be vacant seat. Former state representative Elizabeth Esty, whose husband Daniel was appointed Commissioner of the Connecticut Department of Energy and Environmental Protection (DEEP) by Mr. Malloy last and Daniel Roberti are also announced candidates. On the Republican side of the barricades, Justin Bernier, a member of former Governor Jodi Rell's cabinet who ran for the seat in 2010, Mike Clark, chairman of the Farmington Town Council and a former FBI agent, businesswoman Lisa Wilson-Foley, businessman Mark Greenberg, who also ran in 2010, and state senator Andrew Roraback are campaigning for the seat.

Most Republicans running for office who have some personal experience with business are familiar with the principle underlying business flight, which may be stated as follows: Whatever you tax tends to disappear. If you tax millionaire hedge fund operators who live in Fairfield’s Gold Coast, both hedge fund businesses and its employees will leech out of the state in search of more favorable profit margins elsewhere. Mr. Malloy has been known to worry in public that Connecticut’s neighboring states would benefit from exorbitant taxes on hedge fund millionaires, however popular and politically beneficial the prospect of taxing millionaires might be to progressive politicians. Like water, businesses flow from high cost to low coast states, and taxes are one of the controllable components of the cost of doing business.

Mr. Donovan favors taxing millionaires to pay for a budget that has increased threefold since the last Democratic governor in Connecticut, William O’Neil, held office. And it is quite simply an exercise in futility to point out to him that the state is not suffering from a revenue problem. The threefold increase in state spending within a little more than two decades is undeniable proof that the state is suffering from a spending problem the present Speaker of the State House of Representative has no interest in addressing.

The same principle of disappearing opportunities applies to politically inspired increases in the minimum wage, a populist measure supported by Mr. Donovan, whose ambition it is to propel Connecticut into first place among states that impose the highest minimum wage. Beyond a certain level, the minimum wage forces companies that cannot afford it to cut back on employment or go out of business. Costly boosts in the minimum wage affects only those employers whose profit margins are slight. Capital rich mega-companies will be able to absorb Mr. Donovan’s impositions, but these are not companies that hire workers who have in the past been paid the kind of wages Mr. Donovan hopes to boost through his minimum wage legislation.

People with little or no working history are those most likely to be adversely impacted by Mr. Donovan’s bill. Low income workers and teenagers in blighted urban areas who hope to place their feet on the bottom rung of the ladder of success will find that the rungs have been hacked off by legislators in a Democratic dominated General Assembly who for reasons of political expedience had yielded to Mr. Donovan’s anti-business ideology.

A business that might hire a child of the city making his way valiantly and honorably through circumstances Mr. Donovan little understands needs capital to pay his workers’ wages. Mr. Donovan has yet to be convinced that you cannot have capitalism without capital. If he succeeds in making his way to the U.S. House of Representatives in Washington, home of the magic money tree, it is possible he may never learn what children of the city already know: When the profit margins of businessmen who are likely to hire them is reduced, the prospect of their being hired is proportionally reduced.
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