One of the achievements that Gov. Ned Lamont has touted the most is how his administration “put Connecticut’s fiscal house in order.” Simultaneously, the Lamont administration has celebrated what they call “the largest tax relief package in state history.” As the kids say, this math isn’t working — how has Connecticut managed to operate with a surplus while cutting taxes across the board? The short, easy answer is COVID-19. In the early days of the pandemic, the federal government showered individuals and states with money to keep them afloat during lockdowns that starved people of income and states of tax revenue.
But the money spigot has been shut off, and we’ve already seen how a lack of federal money has led to some creative accounting to keep pandemic-era benefits in place — such as shifting money from one program to another to keep free lunch in place for all of Connecticut’s students. As these programs dry up, the dark secret to Connecticut’s fiscal house will become clearer: the state has a worrying reliance on regressive policies that place financial burdens on low-income people.
One of the clearest examples of these policies has been the explosive growth of lottery games in the state. Not long ago, the only game in town was the Connecticut State Lottery, which offered daily games, scratch-off tickets and a twice-weekly drawing for a large cash prize. Mega Millions and Powerball joined the party in the last 20 years, enticing players with eye-popping jackpots that regularly cross into the hundreds of millions, and even billions, of dollars.
Connecticut added keno to bars in 2016, relying on the time-tested combination of alcohol and poor decision-making to grease the spending wheels. And in 2021, the state legalized online sports betting with the Native American casinos, opening an entirely new way to pry money from resident’s pockets.
This expansion has paid off, for the state at least. The Connecticut Lottery Corporation contributed $418 million to the state’s general fund in 2021. While this number was buoyed by an increase in lottery spending across the nation during the height of the pandemic, the state shows no sign of decreasing its growing dependence on the lottery to help fill its coffers.
The issue is that experts have long described how the lottery is a regressive tax scheme. Studies have shown that the majority of lottery tickets are purchased in the lowest-income zip codes across the country. While lottery purchases are similar across income levels, this obscures the fact that low-income households spend a larger portion of their resources than wealthier people. And finally, there’s the common sense aspect of what the lottery actually is — an infinitesimally small chance to win money. The people most likely to take that chance are people who need the money.
Another example is the surge in “sin taxes” on different items across the state.
In 2006, the average cost of a pack of Newport cigarettes was $4.35. Today, the average cost of cigarettes is $10.04, which is the third-highest cost in the country. That increase has been almost entirely attributed to additional taxes added to the cost of the cigarettes themselves. The state has taken a similar approach to cannabis sales, levying three separate taxes on cannabis products for a total increase of about 20% on the overall price. Never mind that, like the lottery, low-income people are more likely to smoke and therefore pay those taxes. Sales taxes generally fall harder on lower-income people. Where the state’s income tax operates under a graduated, progressive scale, sales taxes have no such graduation. Piling on additional taxes eats into the finances of low-income people far more than well-to-do state residents.
While the declaration of tax cuts garners headlines and plaudits, the reality is that a bait and switch has been underway for years that has been steadily shifting the tax burden toward those who can least afford it. If tax relief is to be celebrated, then the benefits need to be more widely spread and equitably distributed, instead of loading shadow taxes on drunk patrons in bars.