In closing a $2 billion hole in Connecticut’s next budget, Governor
Dannel Malloy does not have many cards left in his hand. In his first budget,
Mr. Malloy was careful to steer a path around state cuts to municipalities. He
chose instead to execute a broad based tax increase, the largest in state
history. That hefty tax increase permitted the governor to “hold the towns
blameless,” in the words of recently installed Speaker of the State House
Brendan Sharkey.
That was then. And now?
Said Mr. Sharkey after his installation, “It’s inevitable
that there are going to be some cuts. I hate to say that. I’ve been a longtime
advocate for protecting cities and towns and boards of education from cuts in
funding from the state. I don’t think it’s news to any cities and towns and
boards of education out there. They are very appreciative of the fact that
we’ve done as much as we have to hold them blameless for the last two years.”
It may be important to notice that the cuts in state aid to
towns will not of itself reduce state spending. Cuts in state aid to towns will
spur either municipal spending cuts, property tax increases or both. A cut in
state aid necessarily would result in a loss of revenue, leaving municipalities
with a political Hobson ’s choice.
Tax increases are anathema to both town and state officials
– because those who pay town and state bills, municipal and state taxpayers,
are having a great deal of trouble making ends meet. Taxpayers in the state are
maxed out on taxes, thanks in large part to improvident state legislators who
have consistently raised taxes and as consistently increased spending.
Legislators tend to operate under the illusion that federal,
state and municipal tax payers are discrete categories, conveniently forgetting
that the federal tax payer is the state taxpayer is the municipal property tax
payer. Connecticut residents Mr. and Mrs. Smith, if they earn more than
$250,000, will get socked with very hefty federal tax increases as the Obama
administration unfurls. Those tax increases, in the absence of cuts to
entitlement programs, will leave state taxpayers with less money in their
budgets to absorb future state and municipal tax increases. When Mr. Malloy
imposed upon Connecticut citizens the largest tax increase in state history, he
made it less possible for municipalities to increase property taxes. Federal,
state and municipal taxes are all drawn from the same pockets.
Tax increases are particularly onerous right now for a host
of reasons, not the least of which is this: As the poor and lower middle class
are more often sheltered from paying taxes, the tax load designed by
progressives is shifted increasingly to a smaller number of people, so that the
incentive to spend increases in proportion to a decrease in the number of
people who finance the spending. To put it plainly, tax consumers are
increasing and tax payers are decreasing. And of course Mr. and Mrs. Smith pay
federal, state and municipal taxes, so that an increase any one of the
categories affects their ability to pay in the remaining two categories.
A measure of relief will come to Mr. and Mrs. Smith only if
the town or the state or the federal government cuts spending, at which point
Mr. and Mrs. Smith will be able to afford a higher payment to the remaining two
taxing authorities. None of this is rocket science. Just as you cannot squeeze
water from a stone, so you cannot squeeze tax receipts from people or businesses
in a declining economy. The money just isn’t there.
And the enticing notion that “millionaires,” defined by tax
gobbling politicians as households earning more than $250,000 a year, will be
able to pick up the tab left by the rest of us is little more than a campaign
slogan successfully used by Democrats this election season to retain the White
House and the U.S. Senate. But reality, like God, does not play dice with the
universe. If you are spending more than you are taking in to pay expenses, reality,
sooner or later, will have a word with you.
Municipalities face the same problem as the state, which is
why mayors and town administrators should insist that every dollar reduced by
the state to towns and cities should be off-set by reductions in costly
regulations and state mandates, a chorus
of common sense Republicans should be happy to join.
Connecticut, one hopes, is fast approaching a “bolt out of
the blue’ realization that the tax cupboard is bare, at which point, one hopes,
Mr. Sharkey and other free spenders within Democratic Party ranks will realize
– it’s time to cut spending, reduce business taxes to re-ignite Connecticut’s
flagging economy and pare back job slaying regulations.
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