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It’s Not About the ‘Millionaires’ September 3, 2009 Governor M. Jodi Rell’s cowardly acquiescence to a budget that includes higher taxes and no significant spending reductions makes it clear: Connecticut politicians have no desire to kick their addiction to Big Government. The retroactive tax on “millionaires,” which has generated the most media coverage, is merely the political class’s latest score. It’s designed to prop up faltering revenue, so that goodies can continue to flow to the beneficiaries of a runaway public sector -- e.g., welfare cases (a group that includes both individuals, corporations, and municipalities) and government employees. Has Connecticut’s income tax “underperformed”? Between 1998 and 2008, real revenue generated by the levy ballooned, from $4.75 billion to $7.51 billion. That’s a spike of 58.1 percent, despite the dot-com bust, 9/11, and George W. Bush. The windfall wasn’t enough. That was to be expected, since the imposition of a broad-based income tax was itself a scheme aimed at avoiding budget decisions likely to inflame politically powerful constituencies. In 1991, the state was reeling from a severe recession and facing years of red ink. After a battle that stretched into late August, Democrats and Republicans in the General Assembly, with the thuggish backing of a governor nominated by something he called “A Connecticut Party,” shifted the state’s tax on interest, dividends, and capital gains to all income. (The director of the State University of New York’s Center for the Study of the States said Connecticut was “finally … facing up to the inevitable,” while The New York Times called the new tax “a striking advance.”) Both the executive and legislative branches promised meaningful “cuts” to quell voters’ rage over lighter paychecks. State Rep. Robert Farr, a GOP simpleton from West Hartford, was “willing to accept an income tax in exchange for the downsizing of state government.” But a look at inflation-adjusted state spending during the period reveals that old habits proved impossible to break: * 1989: $11.06 billion More recently, Connecticut’s sluggish economy hasn’t kept “visionary” solons from using every penny they can loot from taxpayers on trendy causes such as preschool, “open space,” healthcare “for the children,” and government-run trains and busses. In real terms, the state spent $15.87 billion in 2000. In 2010, it will spend $18.64 billion -- an increase of over 17 percent, despite negligible population growth. Both supply-side enthusiasts (“hiking marginal tax rates will bring about Armageddon”) and economically illiterate lobbyists for Big Government (“taxes never affect behavior”) have dominated the debate over Connecticut’s fiscal crisis. Within a few years, data will enable one side to claim victory. The income-tax hike is sure to prompt many hedge-fund mangers to bolt, taking both jobs and millions (billions?) of dollars in tax revenue with them. However, trust-fund limousine liberals, enthralled by gay marriage and jihads against carbon dioxide, are likely to remain in a “progressive” state. The larger story, one which still awaits investigation by an enterprising reporter or two, is Connecticut’s long, slow slide into economic malaise -- a trend directly attributable to government policies. Since 1989, when the number of private-sector jobs in the Nutmeg State peaked, median household income, adjusted for inflation, has dropped by over $4,000. (Nationally, the figure rose by over $3,500.) One of the state’s chief exports is young adults, who see no way to stay in a place where high-paying jobs are scant and the cost of living is brutal. Connecticut hasn’t even begun to address its tens of billions of dollars in unfunded liabilities. The burden of generous pension and healthcare promises to bureaucrats and debt fueled by countless pork projects can’t be avoided forever, and when those bills come due, the highest-in-the-nation tax burden Nutmeggers face today could look mild. Who’s behind this debacle? Thoughtful taxpayers confront disturbing conclusions about the ruling elites in Hartford. One possibility is that they are so stupefyingly ignorant of fiscal truths that they fail to grasp the damage they’re doing to Connecticut’s quality of life. Contrariwise, lawmakers and the governor know exactly what they’re doing: enriching their public-employee and dependency-class patrons at the expense of workers, entrepreneurs, and investors. Either notion is almost beyond comprehension. Many addicts want to get better. For those who don’t, friends and family members sometimes craft a confrontation aimed at convincing the rummy or junkie they love to enter rehab. An intervention isn’t an option with the state’s spendaholic pols. But voters have something better. It’s called election day, and it arrives on November 2, 2010. D. Dowd Muska is a writer, commentator and lecturer. His website is www.dowdmuska.com. # # # # #
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