Sunday, October 12, 2014

Fox Meet Henhouse: Promises, Promises, More Taxes On The Way

The Hartford Courant has only recently discovered the vital connection between taxes and spending: The more you tax, the more you can spend.

For many years, stretching back to the administration of maverick Governor Lowell Weicker, the father of Connecticut’s income tax, the paper argued in countless editorials and op-ed pieces that Connecticut did not have a spending problem; it had a revenue problem. Translation: The state needn't worry about the level of taxation or spending or regulation, a hidden tax on the cost of business in the state, for as long as Connecticut was viable enough to continue to increase taxes. Any bumper stickers from the failed anti-income tax years reading “I survived the Weicker income tax” are, this year, 23 years old. In two years, Connecticut will be celebrating the 25th anniversary of the Weicker income tax – which, during its day, was thought to have solved Connecticut’s revenue and tax problems.

However, Connecticut had not left its deficits in the dust. There are voters in Connecticut who have no personal memory of pre-income tax days when then Democratic Governor William O’Neill was struggling with a deficit of about $1.5 billion.  Mr. O’Neill’s predecessor, Governor Ella Grasso, who could pinch a penny until it screamed and who was a far more prudent spender than Mr. O’Neill, was at least as vigorous an opponent of the income tax as Tom Scott, one of the anti-income tax organizers of the largest protest rally in state history. During the administration of Mrs. Grasso’s predecessor, Republican Governor Tom Meskill, an income tax bill had been approved by Connecticut’s General Assembly; the measure was quickly repealed, and from that day forward Mrs. Grasso became an implacable foe of the income tax. Mrs. Grasso really did think that instituting an income tax in response to budget deficits would be like “pouring gas on a fire,” an expression used by Mr. Weicker during his gubernatorial campaign to convince those who might vote for him that he would reject the arsonist impulse once he had become governor.

Still tooting its most favored premise – Connecticut has no spending problem; it has a revenue problem – the Courant rejoiced in the Weicker solution.  Governor Dannel Malloy’s solution to deficits was precisely the same as Mr. Weicker’s.  Mr. Malloy, the first Democratic governor since Mr. O’Neill, passed through the Democrat dominated General Assembly the largest tax increase in Connecticut’s history. Looking forward, Connecticut – following the two largest increases in state revenue – is now facing a biennial deficit of some $2.8 billion.

And Connecticut taxpayers, previously suckered by the Courant’s pitch, are beginning to feel as if they had been sold a lemon by shifty used-car governors. Mr. Malloy, following the imposition of the largest tax increase in Connecticut’s history, has promised on numerous occasions that he is done with tax increases. Few believe him.  Mr. Malloy now finds himself between a rock and a hard place of his own making: Having pledged not to increase taxes, he must reduce a deficit larger than that facing Mrs. Grasso, Mr. O’Neill or Mr. Weicker – and yet he has pledged not to decrease spending.

What to do? The political problem is this: How do you raise revenue, while at the same time appearing to reduce taxes?

The answer to this apparent conundrum is simple, according to the latest Courant editorial: You form a commission that will, you hope, recommend to Mr. Malloy and the Democratic dominated General Assembly a severe reduction of municipal property taxes, a revenue stream used by towns to finance municipal government.  The reduction -- better still, the elimination of property taxes – will be absorbed by state government, and the drastic change in revenue streams will break the back of municipal opposition to spending and higher taxes.

The tax reform measure supported by the Courant offers additional benefits to grasping politicians:  It will remove political decision making from town to state government and, in effect, make town governments – which have in the past controlled spending in response to budget deficits – wards of the state. The same Democratic Dominated General Assembly that has in the past imposed on state taxpayers, now dwindling in number owing to the out-migration of Connecticut’s middle class, the two largest tax increases in state history will be charged with the spending and revenue problems of town governments.

Fox, meet henhouse.

The tax-soaked and over regulated people of Connecticut should reject any reform that will, directly or indirectly, increase state taxes while shifting spending reform from municipal to state government.  It is perfectly obvious to anyone who has lived in Connecticut with his or her eyes open for the last quarter century that municipal governments can and do control municipal spending, while state government cannot and will not control state spending.

There are two reforms essential to restoring the well-being and political health of Connecticut: 1) Cut spending, 2) Get the fox out of the henhouse.

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