Saturday, January 24, 2015

The Holes In Connecticut’s Revenue Bucket


We all know that when the price of a taxed product or service drops, tax revenue also decreases. The severe cut in the price of gas, for instance, cannot help but affect Connecticut’s already stratospheric gas tax revenue.  When the price of gas at the pump was hovering around $4 per gallon, state government was reaping far more in revenue than is presently the case, after the price of gas at my nearest pump has plummeted to $2.30 per gallon.

When people move from cancer causing highly taxed cigarettes to more healthy untaxed e-cigs, one may expect tax revenue to decrease proportionally; though, in this regard, one must never underestimate the steely resolve of consumer protection senators such as Dick Blumenthal, tireless in his pursuit of new products that might be taxed or companies that might be sued. The perfect progressive, Mr. Blumenthal, it should be noted, is interested in reforming everything BUT government.


Retirees are taxable products with wings on their ankles and brains in their brain pans. Tax then exorbitantly, and they move – many times to Florida or Texas where “seldom is heard a discouraging word, and the skies are not cloudy all day.”

Recent estimates from the U.S. Census Bureau indicated that Connecticut residents know which side their bread is buttered on. According to the current  Census Bureau report,  nearly 26,000 more people moved out of Connecticut than was the case between July 2012 and July 2013. The increase represents Connecticut’s first population drop since 2008 and the third-largest percentage population decrease of any state save West Virginia and Illinois.

One does not have to be Governor Malloy or President Pro Tem of the Senate Martin Looney or Speaker of the House Brendan Sharkey to reach the inevitable conclusion arising from such calculations:  Fewer people, less revenue.

Here are some other figures reported in the census:

*Younger people are moving to high density large cities such as Washington, New York and San Francisco, no doubt carrying with them their very expensive sheepskins from Connecticut colleges. The out-migration of the young is devastating to a state simply because the receiving state will reap taxes for the number of working years that young immigrants, had the exodus not occurred, would have remained in Connecticut; the younger the migrant, the greater the loss in net tax revenue.

*Connecticut’s out-migration is mitigated somewhat by an increase in immigration, but there is a hitch. In 2013-2014, Connecticut’s immigration nearly doubled from 2011; but there has been a demographic change in migrants from US to foreign born immigrants. “We are rapidly seeing this demographic change to the more diverse,” said economist Ron Van Winkle. Mr. Van Winkle, West Hartford’s town manager, noted “Even in West Hartford, the number of people that are foreign-born has been increasing substantially.

*The “natural increase” in population, the number of births minus deaths, is tending downward, Mr. Winkle says, largely because marriages are being postponed to a later age, and women are deciding “not to have babies as they grow older.” The “natural increase” number is still positive in Connecticut but decreasing substantially. There were 9,075 more births than deaths in 2011, a number that dropped last year to 6,900.


And then there is the double whammy. The number of baby-boomer retirees will increase sharply in coming years, but they may not be spending their retiring years in Connecticut. A state employee drawing on the public purse for retirement benefits depletes state revenue – and, assuming a move out of state, both his salary and benefit portfolio will enrich the state to which he has moved. Retirees whose incomes are static are moving to states in which taxes and the cost of living – mortgages, rents, food and amenities-- are lower. 

Mr. Van Winkle’s conclusions are not such as would send a tingle up the leg of Mr. Malloy or the Democratic majority in the General Assembly:

 “We’re going to see some sizable issues on these population fronts, with people retiring and moving, and young people choosing other places because job creation isn’t what it should be. It’s a relatively quiet economy, and that won’t generate what our leaders are hoping for.

“Companies are growing where they can find people and skilled labor, and even though Connecticut’s labor force is highly skilled, it’s not growing at a rapid rate. So … it doesn’t bode well. … It’s not that we’re moribund. It’s just a slower growth area.”

It’s not cancer, but you’re going to die anyway, unless you a) cut spending, b) reduce regulations, c) wake up and smell the festering lilies. 





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