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Irritants 4

 

Friedman -- Bloomberg

Omnibus Budget Bill Consideration

All the members of the state’s General Assembly, both Democrat and Republican, should have at least a few days to analyze and digest a final budget bill before voting upon it. Ample time is now devoted to public headings within the various committees in the General Assembly charged with refining the state budget. However, the refined final budget usually is presented for an up or down vote in the General Assembly hours before a vote on the final product is tallied.

The Queen of Hearts proclaims in Lewis Carol’s Through the Looking Glass, “First the verdict, then the trial!” Lovers of justice may instantly denounce the perverse reversion. Present conditions in voting budgets up or down – first the vote on a finalized budget, then an analytical consideration of the proposed budget in the absence of public hearings -- should be intolerable in any representative system of governance.

A Flat Rate Negative Income Tax

Governor Lowell Weicker’s new 1991 state income tax was supposed to be a flat rate tax that everyone, corporations and individuals alike, would not hesitate to pay because paying a flat rate would be less onerous and economically burdensome than hiring forensic accountants to provide progressive tax detours. Weicker probably understood that complexity opens a window to political skullduggery and corruption. 

Once progressive laid their hands on Weicker’s new income tax, the flat rate became more and more progressively steep and in due course Weicker’s fleeting budget surpluses disappeared, like the infirm promises of politicians who have their eyes fixed on reelection rather than the efficacy of their economic reforms.

Governor Ned Lamont’s budget director, Jeffrey Beckham, recently reminded us that  Connecticut’s state income tax presently is highly progressive: “Most households making less than $40,000 per year have little or no state income tax liability, and the administration says that the governor’s new proposals would push that threshold to about $50,000,” according to a recent piece in CTMirror.

Milton Friedman decades ago championed a flat rate tax with a negative income tax feature that would reverse-flow taxes from rich to poor and eliminate the tax burden of those who fell below a specified poverty level.  Everyone – poor, middle class and rich – would pay the same flat tax rate because it is always useful for the entire tax dependent population to be equally invested in government. Ideally, tax payers should know each fiscal year what their tax bill is, but the complexity of tax codes provide safe havens for self-interested politicians and the rich, who can well afford to escape a tax hanging.

The negative income tax in Friedman’s scheme would return taxes to those falling below a preset poverty floor, and the negative feature of the flat tax could be used to eliminate or substantially reduce a costly state employee apparatus charged with transferring tax receipts from the haves to those in Connecticut who now pay little in the way of taxes.

The beauty of a negative income tax is that it leaps over a costly administrative network and provides direct payments through the tax code to those falling below a poverty level – eliminating or severely reducing an increasingly unaffordable middleman.

That middleman, a complex network of private and public organizations and budget influencers, has become both unsustainable and clamorous for massive increases in spending. The Democrat Party in Connecticut, as well as an uncritical state media that does not wish to alienate a growing government from which it receives its news and marching orders, has continually winked at unsupportable increases in spending.

Spending, Bonding and Revenue Guardrails

Governor Lamont has just presented his two year, $50.5 billion budget to the General Assembly. The tax cuts provided in the budget “for the middle class” are progressive; what else is new? And the governor was at pains to stress that “guardrails” previously installed by a rare bipartisan legislature should survive ten years into the future. The governor credits the guardrails – caps on spending, bonding and tax revenue -- with producing the state’s first major surplus since the Weicker income tax. Taxpayers in Connecticut may gauge the rapid pace of state spending by comparing the last pre-Weicker budget, about $7.5 billion, with the current $50.5 billion biennial budget, a threefold yearly increase.

The number of times the words “spending cut” – other than to denounce spending cuts -- has affirmatively appeared in news broadcasts in Connecticut is nearly zero. State debt at $53 billion is unsupportable. And the progressive Democrat legislature, a few days after Lamont had stressed to legislators the importance of a “guardrail” covenant limiting raids on surpluses and so called “lockboxes,” has now dismantled half of the much praised guardrails, reducing from ten to five years an extension of the guardrail covenant that Lamont praised extravagantly as “one of the smartest actions the General Assembly has taken over the past decade.” The guardrails, he said, “have provided predictability and stability to our budget process” and “ended the era of wishful budgeting and the so called fiscal process.”   

Alas, the progressive General Assembly’s wishful budgeting is the governor’s command.

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