According to a recent DataHaven survey, people living in rich towns are surviving the pandemic just fine, while those in our poorest cities and towns are worrying more about housing, food, and employment than they were in 2019. Connecticut’s divides are deepening, and it’s not a problem we can easily fix with tax cuts.
I’m suspicious of tax cuts, especially in an election year. They always feel like a gimmick to me, a way for a politician to say, “Look, I cut taxes!” Great, nice job. Tax cuts have more of a cultural meaning than a real economic effect in most cases. How much do tax cuts matter to the people trying desperately to put food on the table and keep the heat on in the dead of winter?
The government likes fiddling with tax policy as a way of addressing all kinds of problems, from cigarettes and gambling to poverty and economics. It’s easy, because taxes are the province of the government; they can do what they want with them. The end result is a ridiculously complicated tax code that tries to do too much in too many different areas with the end result that it’s very hard to know which parts of the tax code are having what effect.
Many of the tax cuts proposed by the governor this past week feel like they fall into that category. After all, it’s not like we’re cutting the income or the sales tax, which is something we’d notice right away.
Cutting property taxes, especially on cars, is a great idea, but whenever the legislature has tried it they always get hung up on how to pay municipalities back for the money they’d lose. Car taxes are major sources of income for cities, especially ones with lots of untaxable property like New Haven (Yale) and Hartford (state government).
So what do we do about inequality?
If we really wanted to address it through taxes, which feels like just the tip of the iceberg, we could make the income tax more progressive than it already is. Exempt more income from tax on the lower end of the scale, and tax at higher rates on the upper end. We could find ways for cities to raise money that isn’t property-tax based, such as allowing municipal taxes on hotel rooms and sports/entertainment.
But that’s only going to go so far, and it’s more about preserving a precarious status quo than it is about really, truly addressing the problem of inequality.
For that, we need to ask ourselves: what do we actually want to do? What’s the end result? Yes, we want to create a place where the right to life, liberty, and the pursuit of happiness isn’t constrained by how much money someone has, where someone lives, or who someone is. But what does that more equal Connecticut actually look like, and how do we get there?
Maybe it goes something like this. We want to make it easier for people to live here, so we need more affordable housing. Because most towns aren’t going to want to do that on their own, the state has to keep pushing zoning reforms.
There should be equality of services, especially schools, between towns, but that requires entire regions to work together. Wealthier towns aren’t likely to do that unless the state forces them.
And, of course, things that wealthier residents take for granted, like health care and higher education, should be accessible to everyone. That would require big reforms to health insurance, as well as cheaper or even free public colleges and universities.
That doesn’t even get into issues like policing, food insecurity, unemployment, mental health, and more.
Sometimes tax reforms can be good things, and I’d love to see the property tax burden come down in our cities. But by and large, all of the fiddling we do with taxes, especially with moving tax credits around, is only a small piece of the puzzle if we want to really address the widening gulf between rich and poor in Connecticut.