Saturday, June 16, 2012

Big Smoke To Malloy: Thank You For Taxing

The old saying has it: You can’t beat City Hall. Municipal government is too big to beat. State government is bigger and, presumably, harder to beat. The federal government is mountainously big,

On the matter of taxes, all three unbeatables tend to hunker down whenever the little guy attempts to deny any of them their daily revenue fix.

In a “special session” of Connecticut’s General Assembly, usually called to tidy up legislative loose ends from the regular session, the Democratic dominated legislature this year closed what one newspaper styled in an editorial “an expensive loophole in the law that allowed tobacco shops with roll your own machines to sell professional style cigarettes at about half the cost of packaged ones.”

By “expensive” the paper intended to indicate the potential loss in revenue to the state.

And the “loophole?”

Sensing a loss in revenue should smoke shops be permitted to sell cigarettes at half price, the tax hungry administration of Governor Dannel Malloy first attempted through court action to shut down the new smoke shop businesses springing up in Connecticut like magic mushrooms. The absence of a tax – as everyone knows, though politicians conveniently pretend otherwise – is a true stimulant of business activity, which is why, come to think of it,“green” legislators favor high taxes on gasoline: The higher the tax, the less sellable the product.

The state, considerably bigger than City Hall, claimed the smoke shops were “tobacco manufacturers” and as such subject to the same excise taxes as Big Tobacco. The court chuckled at this assumption – Do big tobacco operations allow customers to “manufacture” their own smokes? -- and ruled in favor of the little guys, much to the annoyance of the lean and hungry Malloyalists. No, the court said, the Mom and Pop smoke shops were not tobacco manufacturers; no excise taxes this time, if you please.

Malloyalists were not pleased. The lean and hungry Malloyalists raced to Democratic leaders in the General Assembly, pleading with them: Find a way. Assembly leaders, hungry for more tax monies they might distribute to cosseted special interests, proceeded to treat the court ruling as if it were a metaphysical abstraction, and they got up an bill that would, in the immortal words of U.S. Senator Dick Blumenthal, “level the playing field” between cash starved startup Mom and Pop operations and rich and contented Big Tobacco.

Should the bill imposing crippling taxes on small smoke shops pass, the Mom and Pop operations would pay the same amount in taxes as Big Tobacco, swelling state coffers with more tax swag that might be distributed to, say, a notoriously inept UConn Health Center or a too big to fail insurance company or a bribable mega-company threatening to leave the state for more even playing fields elsewhere or… fill in the blank; the possibilities are endless.

The Malloy administration most recently has given millions of dollars of tax money through the state’s Small Business Express Program to companies that “qualify for assistance.” In a recent media release, the governor is quoted to this effect: “The Small Business Express program recognizes the importance of small companies in Connecticut, both in their impact on the economy and their ability to push the dial on innovation and emerging technologies. By providing access to capital, we can help these businesses tackle the most important issue of the day – job creation.”

Even the lesser gods of the marketplace must envy the life and death powers wielded by corporatists Malloyalists. Mussolini preferred the term corporatism rather than fascism to describe the mutually advantageous relationship between his authoritarian state and preferred businesses. Mussolini defined corporatism this way: “Everything in the state; nothing above the state; nothing outside the state.”

Alas, the best laid plans of mice and men are sometimes torn asunder – on this occasion by the FBI. On the route to higher taxes and, inevitably, more spending, the smoke shop deal came crashing down upon the ears of longtime Speaker of the State House Chris Donovan, whose finance director was arrested for campaign financing irregularities, a momentary interruption in the forward motion of Mr. Malloy’s temporarily frustrated attempt to re-invent Connecticut.

Long story short: Things happen in politics in certain ways because powerful shakers and movers in politics want them to happen that way. Smoke shops likely will be run out of business, because Mom and Pop start-up operations cannot afford Malloyalist impositions; consequently, the revenue haul anticipated by Office of Policy and Management (OPM) guru Ben Barnes will likely fall short of Malloyalist goals. Why? For two reasons: 1) You can’t tax a business that you have taxed out of business; and 2) Creative smokers, who can count up to 25 more accurately than Mr. Barnes are likely to purchase a roll your own machine for about $25 and create non-taxable roll your own court approved “manufacturing” operations in their own homes.

But Big Tobacco will be happy to be rid of a dangerous competitor, thanks to a forward moving one party Democratic state... and… and… the campaign check will be in the mail. Count on it.
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