Monday, April 30, 2007

Welcome To Connecticut, The Land Of Steady Taxes

One of the reasons advanced by pro-income tax proponents in those halcyon days when the state budget was only one half of the present money sucker was that the sales tax, then the state’s principal revenue producer, was volatile.

In good times, the state’s coffers were full to brimming; but in bad times, revenues trickled in, causing deficits. One happy consequence of the deficits was that they occasionally prompted legislators to cut spending.

All this happened in days long past during the administrations of Gov. Ella Grasso, a notorious penny-pincher, and Gov. William O’Neill. Both Grasso and O’Neill were fiscally responsible Democrats; neither were conservatives. Both were unalterably opposed to an income tax.

The red ink -- caused then and now by overspending -- troubled legislators who in lean years were forced to cut spending, because spending cuts aroused the antipathies of precisely those people, teacher’s unions and other tax consumers, who, mightily upset, were fully capable of driving the penny-pinchers from office.

And so, the push for an income tax began. Pro-income tax support was drummed up by the Hartford Courant. Many anti-income tax battlers still recall the sighs and laments issuing from that quarter: The sales tax was insufficient, because it was an uneven revenue stream; relying on the sales tax, Connecticut had in times past been forced to add to the sometimes swollen, sometime slender tax stream a whole series of minor tributaries, niggling little taxes that annoyed people -- especially proponents of the income tax. An income tax, it was said, would do away with all this, provide a steady, reliable tax stream unaffected by the vagaries of the marketplace, and put the state on an even keel.

These were the chief arguments employed by then Gov. Lowell Weicker and Office of Policy Management chief Bill Cibes among them, to sell the income tax to wavering legislators.

Three governors after Weicker’s November surprise, what hath we wrought?

The current budget has metastasized; it is twice the size of the last, pre-income tax O’Neill budget. Although an uncertain and volatile revenue producer, the sales tax was not abolished when the income tax was instituted. The income tax was simply added to the notoriously unreliable sales tax. A swarm of niggling little taxes now hovers, gnat-like, above the income tax. Indian casinos, unknown to Grasso, now form some of the many tributaries that feed the swollen tax stream. The cigarette tax, perhaps the most regressive impost on the list of Connecticut’s niggling, pestiferous taxes, has just been bumped up by a Democrat dominated legislature that Grasso would have been the first to inveigh against. Grasso also would have made hash of Gov. Jodi Rell's grosser pretentions.

And now, President Pro Tem of the senate Don Williams and Majority Leader of the House Jim Amann, have proposed, over the feeble objections of some Republicans, to narrow the base of the income tax by making it “less flat.”

The problem is: The income tax is not flat. Built into the tax are exemptions and perks that round its features, until it begins to look very much like a progressive income tax.

Under the current so called “flat tax,” according to an analysis provided by the non-partisan Office of Fiscal Analysis, the top two-tenths of 1 percent of tax payers – rich people paying their “fair share” -- pay as much in taxes as the bottom 77 percent of all filers combined. Under the Democrat plan, that same group, filers earning $2 million or more, would pay as much in taxes as 90 percent of all filers.

The tax paying base, in other words, would be narrower: Fewer people would be paying more taxes.

And his is where we came in when the income tax was first proposed.

The significant change has been in the amount of taxes collected. That increase has been fueled by spending and not, as was supposed when the income tax was first instituted, by deficiencies in the manner in which it had been collected.

To reverse a well known formula much bruited about when the tax was but a gleam in the eyes of Weicker and Cibes, “Connecticut does not have a revenue problem; it has a spending problem.”

1 comment:

Dave Moelling said...

A lot of the resistance to taxes has faded from the Suburbs. The politicians now have cottoned on the fact that if they dangle enough trendy presents (open space, arts, Blue Back square) it provides cover for the real spending on teachers and other gov't employees.

These things help the McMansion crowd gain social acceptability and keep up with the Kerry's. (I was going to say the Stuyvesants but thats dated!)

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