Courant On Tax Relief

The canned response to any attempt to lower taxes in Connecticut goes something like this: In the grand scheme of things, savings from the proposed tax reduction will be insignificant. And the computed savings, in any case, will deplete money made available to the state that is used for noble and necessary purposes such as, not to be too bitterly sardonic, miss-educating urban school children for several decades.

Thus does the Hartford Courant vociferously object in an editorial to a decision made by Democrats in Connecticut’s General Assembly to cap the state’s gross receipt tax on gas for one year only.

The title of the paper’s March 24 editorial is “Gas Tax Cap Is Showboating.” Apparently, political showboating in the future is to be frowned upon by editorial editors and writers at the Courant.

A few days before the editorial appeared, Democrats in the General Assembly had devised a TEMPORARY ONE YEAR ONLY cap on the state’s gross receipts tax, a charge placed by the General Assembly on gas upon its arrival in the port of New Haven. The aptly named “gross receipt tax,” in addition to the excise tax on gas at the pump, increases the dollar price of a gallon of gas in Connecticut by about 50 cents, 25 cents for the gross receipt tax and 25 cents for the excise tax at the pump – the highest gas tax in the nation

Connecticut is one of the few states that charge a gross receipt tax, initially levied to pay for upkeep on the state’s transportation infrastructure. Over the years, as so often happens with “dedicated” funds in the tax and spend state, the gross receipts tax revenue stream was partly diverted into the General Fund. The Courant notes in its editorial that last year only half of the $334.5 million generated by the receipts tax, about $165.3, tricked down from the taxing authority into the state’s transportation fund, although the Federal Highway Administration last year ranked 75 percent of Connecticut’s road in “less than good” repair. The state adds its 7.53% Gross Receipts Tax to each wholesale gasoline sale.

The gross receipts tax is especially pernicious because the tax rises automatically with increases in the price of gas and is, unlike the excise tax shown at the pump, hidden from the consumers’ view, an ideal tax for politicians wary of voter’s disapproval at a time when citizens in the state already have been harshly punished by the largest General Assembly sanctioned tax increase in state history.

The super-tax increase, larger even than the massive increase in taxes and consequent spending following the Courant supported Lowell Weicker income tax in 1991, was levied by the first Democratic governor in more than 20 years on sales and service transactions that conscientious editorial writers at the paper doubtless consider, viewing each separately, far more insignificant than the “cost” to state government incurred by a temporary cap on the gross receipts tax. A partial list of new taxes imposed by Mr. Malloy, with the concurrence of the Democratic dominated General Assembly, may be found at the Connecticut Commentary site.

The Courant in its editorial does not oppose the temporary tax relief that would follow upon passage of the Democratic bill because the bill itself, which caps the tax only for one year, is a preposterous fraud.

Pushed over the edge by Len Suzio, a populist Republican who has called for the elimination of the gross receipts tax, Democrats in the General Assembly up for re-election produced a bill that would cap the tax temporarily, a measure designed to fool all of the people some of the time, just long enough to secure the elections of Democratic legislators who favor permanent tax increases and temporary tax relief.

No, the Courant objects, here and always, to ANY tax relief – permanent or temporary – a shameless and reckless position when the ever-rising tide of spending in Connecticut is fatally lowering the level of business activity that former President John Kennedy once said would lift all the boats. The demand-siders on the editorial board of the paper further insist that only a reduction in demand – and not an increase in supply – can reduce the price of gas at the pump, a notion that any economist worth his salt would consider juvenile and anti-historical.

There is not a single economist, living or dead, who does not believe that the price of a product can be lowered by an increase in its supply. When President John Kennedy said that a rising would lift all the boats – a, phrase borrowed by his speechwriter from the regional New England Council chamber of commerce – the president was announcing his intention to spur business activity by reducing tax rates. This is what Mr. Kennedy said:

“It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now."

When thought itself has been replaced by the seeming irresistible urge of left of center environmental purists at Connecticut’s only state-wide newspaper to array one’s unexamined prejudices in print, legislative policy – disastrously – will follow suit.