If you heard people were talking taxes at the Capitol, you’d probably shrug and figure it was par for the course. Politicians in Hartford are always scheming to take away more of our hard-earned cash to feed the beast. So whenever the General Assembly goes into session after the new year, it’s time to watch your wallet.
But now it appears that among just about every class and persuasion of people — save the public employee unions and the far left — there is an emerging consensus that our chief problem isn’t so much that we have too little revenue, but rather how we extract the revenue we collect and what we do with it once we have it.
At least that seems to be the consensus in the corridors of power in Hartford, where members of the Finance, Revenue and Bonding Committee aren’t calling for higher taxes — not yet anyway. Instead, the committee is expected in the next few weeks to embrace a comprehensive analysis of how the state separates taxpayers from their money.
Department of Revenue Services Commissioner Kevin Sullivan told the CT Mirror that lawmakers must focus on a tax policy that encourages job growth and economic development.
“This is not about finding ways to raise new revenue,” said Sullivan, a former lieutenant governor and Senate president pro tem. “If the proposition is finding ways to raise more revenue, then it’s not going to be a useful discussion.”
That’s a remarkable concession, given that Sullivan was a supporter of the state’s first income tax in 1991 and was tax commissioner when Gov. Dannel P. Malloy pushed through the largest tax increase since the Weicker administration. Sounds like Sullivan is finally acknowledging the obvious: state government cannot grow without a thriving private sector to pay for it.
If there’s one thing the left and right can agree on, it’s that property taxes in Connecticut are too high. Bill Cibes, who as budget chief under then-Gov. Lowell Weicker helped ram the income tax through the General Assembly, added that “high property taxes are a major reason why Connecticut’s tax system is broken.”
Not surprisingly, the Connecticut Conference of Municipalities agrees, especially when unfunded state mandates leave towns with no alternative beyond raising their mill rates.
And over-reliance on the property tax can cause towns to make shortsighted planning-and-zoning decisions. Town officials often cite the certainty of increased revenues in approving shopping centers and large-scale subdivisions, even as the resulting infrastructure improvements to roads and schools blunt the windfall.
Since public education spending typically accounts for about two-thirds of your local tax bill, it’s logical to conclude that education funding is the single greatest driver of property-tax rates. Critics have long complained that the state’s education cost sharing (ECS) grant program to school districts is underfunded by $700 million or more annually.
So if we want to control property taxes by having the state assume a higher share of education spending, where is the money supposed to come from? A thriving, growing economy would greatly increase revenues to the state treasury. But beyond bribing corporations to come to Connecticut or buying up money-losing tennis tournaments, the Malloy administration seems to have few viable ideas.
To generate more revenue for state education, I’d pass House Speaker Brendan Sharkey’s proposal to tax certain nonprofits. Then I’d try to make the state more business friendly — not necessarily by cutting taxes (although that would be nice) — but by reforming what Fred Carstensen, director of the Connecticut Center for Economic Analysis at the University of Connecticut, has called “the worst permitting regime in the country.” And I’d start negotiating a reform of the overly generous state-employee pension system — an effort that could surely save hundreds of millions — if not billions — over the next 10 years.
But none of this will matter unless the spending class in Hartford understands one thing: wages and benefits in the private sector are stagnating — in part because of slow growth and skyrocketing health care costs. Meanwhile, workers in the public sector continue to enjoy raises of two, three, even four percent — with far better retirement packages. Since it’s the private sector that funds the public sector, it doesn’t take a rocket scientist to see that the current system is unsustainable.
Maybe — just maybe — that simple principle is starting to assert itself in the Capitol.