Gov. 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 news coverage, is merely the political class’ latest score. It’s designed to prop up faltering revenue so goodies can continue to flow to the beneficiaries of a runaway public sector: welfare cases (a group that includes 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 budget battle that stretched into late August, Democrats and Republicans in the legislature, 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.”) The executive and legislative branches promised meaningful “cuts” to quell voters’ rage over lighter paychecks. Then-Rep. Robert Farr, R-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.
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,” health care “for the children,” and government-run trains and buses. In real terms, the state spent $15.9 billion in 2000. In 2010, it has budgeted $18.7 billion, an increase of more than 17 percent despite negligible population growth.
Supply-side enthusiasts and economically illiterate lobbyists for Big Government have dominated the debate over Connecticut’s fiscal crisis.
Within a few years, data will enable one side to claim victory. The income- tax increase is sure to prompt many hedge-fund mangers to bolt, taking jobs and millions (billions?) of dollars in tax revenue with them.
However, trust-fund limousine liberals, enthralled by same-sex marriage and jihads against carbon dioxide, are likely to remain because this is a “progressive state.”
The larger story, one that 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 state peaked, median household income, adjusted for inflation, has dropped by more than $4,000 while nationally, incomes rose by more than $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 nearly $50 billion in unfunded liabilities, which the new budget adds to in a big way. The burden of generous pension and health-care 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 residents face today could look mild.
Who’s behind this debacle?
Thoughtful taxpayers confront disturbing conclusions about the ruling elites in Hartford. One possibility is 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 relatives sometimes craft a confrontation aimed at persuading 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 Nov. 2, 2010.
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