GREENWICH–Connecticut’s wealthiest community wanted to talk about taxes with Gov. Dannel P. Malloy Monday–specifically, its conviction that it already pays too much, and that his budget unfairly asks for even more.
Whether it involved taxes on personal income, estates, hospital revenues, luxury purchases or regular retail sales, the message was clear: no more–and cut them a little if possible.
“What’s my incentive to live here?” Greenwich native Julia Chiapetta asked Malloy, drawing a large round of applause after arguing that Connecticut’s tax structure has become increasingly reliant on income and other tax revenues from its wealthiest residents in Fairfield County. “Why not move to Florida” where there is no state income tax?
“I think Greenwich is a lot nicer than Florida,” Malloy responded, earning his own applause.
Malloy, who has proposed five new income tax rates–including a new top rate of 6.7 percent on earnings above $500,000 for singles and $1 million for couples–then took a more serious tone. He reminded Chiapetta and others at the meeting that his budget plan for the coming fiscal year largely is driven by the deficit he inherited from former Gov. M. Jodi Rell and the last legislature.
“I understand the frustration people in Fairfield County have,” he said, adding that in other, less affluent sections of Connecticut he is chastised for not seeking higher taxes on the wealthy. “But the point that is inescapable is that I was handed a budget with a $3.5 billion deficit.”
“I don’t understand the equation,” Hal Rogers of Greenwich told Malloy, contrasting the $1.5 billion in new General Fund taxes Malloy wants for 2011-12 with the no-tax-hike plan submitted in New York by Gov. Andrew Cuomo. “It just doesn’t seem, on a macroeconomic basis, to balance out.”
Malloy responded that Cuomo also has proposed massive budget cuts, including hundreds of millions of dollars in education spending. His proposal would preserve all state funding for municipal schools despite a $271 million drop in federal assistance.
The governor did assure residents that while the total tax hike he is seeking is considerable, he plans to hold the line at $1.5 billion. “I know what our tax cap will be,” he said. “I’m not going to ask for additional tax dollars.”
It wasn’t only the income tax that drew complaints Monday. Bailey Banneck, a luxury car salesman for Miller Motorcars of Greenwich, objected both to Malloy’s proposal for a 3-percentage-point sales tax surcharge on autos costing more than $50,000, as well as a plan to levy the regular sales tax rate on all auto trade-ins.
“You’re going to drive a lot of people out of state,” said Banneck, whose dealership sells Rolls Royce, Aston Martin, Bentley, Ferrari and other luxury cars. He predicted that middle-income consumers, not just the wealthy, would migrate over the border for their next car purchases.
But the governor responded that his administration is committed to remaining competitive in terms of all major taxes with neighboring states, and that the sales tax proposal is not going to put Greenwich car dealers at a disadvantage with those in nearby New York.
“I don’t think you’re going to see a lot of people going to Westchester County to purchase that car,” he told Banneck.
Several speakers at Monday’s hearing took aim at Malloy’s proposals for Connecticut’s 29 acute care hospitals, and particularly their impact on Greenwich Hospital.
The governor proposes eliminating $83.3 million in annual funding to the industry to help offset the cost of uncompensated care. His plan projects that the loss of uncompensated care funding will be offset by an extra $160 million next year in Medicaid funding thanks to the state’s decision to place its welfare program for single adults without children under the Medicaid umbrella.
Hospitals officials contend, however, that this decision also has expanded their caseloads significantly, and that Medicaid rates still fall far short of covering the full cost of patient care.
Malloy also wants to leverage more Medicaid money from the federal government by assessing a new hospital provider tax. The $267 million raised by the tax would be redistributed back to the hospitals, but not on a dollar-for-dollar basis.
Several representatives from Greenwich Hospital said that when the fiscal smoke clears, their facility would lose roughly $10 million to $11 million per year.
“I understand that size of the budget deficit and the absence of easy answers,” said Dr. Dickerman Hollister, a cancer physician at Greenwich Hospital. “But I ask you to tell me, a doctor caring for the sickest in this community, what should I tell my patients” as services are curtailed? “Is this the future of medical care in Greenwich?”
“Health care is like a bleeding artery,” said Donna F. Gaudioso-Zeale, a member of Greenwich’s Representative Town Meeting and a nurse at Greenwich Hospital., who told Malloy access to health care is steadily shrinking in Connecticut. “The taxes that you are proposing are just going to open this artery wider.”
Malloy defended his proposals, noting that the hospitals who would lose revenue in the proposed provider tax system are those that handle the fewest numbers of poor, uninsured patients. “I’ll trade a $3.3 billion deficit for $11 million any day,” he said, soliciting a round of “oohs” and “boos” from the crowd. “You can say what you want but we’re trying to come up with a system that’s fair.”
Malloy frequently pointed cited Rell and the deficit she helped pass along to him to justify the painful measures in his budget.
“I think Connecticut has been badly run for a long period of time,” he said, referring to nearly $2 billion in borrowing that was approved between June 2009 and May 2010 to cover day-to-day operating expenses under the past administration, as well as more than $300 million in raids to the state employee pension fund. “Those are the cards I was dealt and I have to deal with them.”
Malloy’s $19.74 billion budget would boost spending 2.4 percent next fiscal year, though most of that increase is tied to the provider tax used to leverage more federal aid. The largest area of spending reductions in the budget involves a plan to secure an unprecedented $1 billion in labor concessions, though several speakers noted Monday that the governor can’t be certain state employees would grant givebacks of that scale.
But Malloy did pledged that regardless of what happens with those negotiations, he would keep searching for options to make state government leaner.
“You are going to see a state government that lives within its means,” he said. “That’s what I’m trying to do.”