Toubman: ‘If we don’t raise revenue somehow, we shred the safety net’
One of Connecticut’s most ardent advocates for social services, attorney Sheldon V. Toubman has worked with the New Haven Legal Assistance Association for the past 26 years.
Toubman is a staff attorney within the benefits unit at the association, which helps the poor, disabled and others in need secure housing, benefits, employment, and legal assistance with immigration and family matters.
Before his tenure with New Haven Legal Assistance, Toubman was a staff attorney with Connecticut Legal Services and with a similar, Philadelphia-based legal aid office. He holds a bachelor’s degree in civil engineering from the University of Connecticut and a law degree from the University of Pennsylvania
A resident of Guilford, Toubman, 60, has two children.
He spoke with The Mirror recently about the efforts of social service advocates to press this year for state tax increases to help close projected budget deficits totaling $5.1 billion across this fiscal year and next combined. Toubman also discussed proposals to increase the income and sales tax, how Connecticut’s tax rates compare with those in neighboring states and the impact of recent program cuts on some of the state’s poorest residents.
Some say Connecticut has been following an austerity approach to budgeting and that has largely intensified since The Great Recession? Would you agree with that, and how problematic is that for the role you play?
I would agree. I’m not sure it’s since the last recession, but I would agree in the last few years we’ve been going down this route of austerity.
I do think that, in general, people — on a bipartisan basis, support the [social services] safety net. They generally believe in it and want to support it. It is not so much an ideological issue as a practical issue, the budget situation driving this austerity.
Ultimately I think it is destructive. Essentially we are destroying the investments that we need to make for strong families, which means strong workers, which is what is going to make our economy boom.
When we see the exits of some of these large companies, although some people claim it’s about tax rates, it’s not about that at all. It’s about a perception that the workforce that’s available in say, Boston or New York, provides them with what they need and they can’t get that in Connecticut.
So I think it’s really critical that we invest in that so we have the workers for the future, and also we philosophically as a state do believe in the safety net for people who aren’t able to work and need significant assistance.
The austerity budgets are taking away the basics of that. The only thing left is that we put people in nursing homes, which is not what people want, nor is it cost-effective.
Whether we’re talking about caring for people in nursing homes, treating the uninsured in emergency rooms because they can’t get preventative care, or somebody on unemployment who could be very productive with the right job training, do most legislators agree with you that spending in these areas yields economic benefits?
I think most legislators actually appreciate that this is true. The problem is that they are looking at the immediate, balanced-budget requirement.
Some of the investments pay off. A lot of the investments pay off. There’s a recognition of that. But they are in a situation where they’re saying “Well, I have to balance the budget right now and though those rewards will come in, they won’t come in fast enough. What am I supposed to do?”
So I think that’s what the problem is. There’s some difference, obviously on the degree to which people believe that these investments are worth it, that they pay for themselves or they partially pay for themselves. There’s certainly disagreements about that.
But I would say, overall, again on a bipartisan basis, that people do believe in that. They’re just under tremendous pressure because of the balanced budget requirement.
Is it just the nature of politics that it’s always going to be incredibly focused on the short-term?
I would hope that folks in this building would be able to take that longer view. Because, after all, there’s a balanced budget requirement next year and the next year and the next year as well.
So basically if you don’t make the investments now, you do make it harder to make your requirement of a balanced budget in the years to come. This is ultimately in everybody’s interests even though it’s a difficult task.
Right now we’ve already had a series of austerity budgets. They’ve already put huge holes in the safety net and right now we need revenue.
How do you respond to the perception at the Capitol that Connecticut has reached some form of tipping point in its ability to tax the wealthy and major corporations, and that any further increases would spark a mass exodus?
I acknowledge that that perception is there among some. But the most recent data we have shows that the number of very high earners has actually increased. So even if a few people leave for any reason — people move around all of the time — they are being replaced. We are actually net-gaining those very high earners.
A lot of the high earners are in the financial services industry, and that industry is really focused around New York.
So it’s relevant to look at what the marginal [state income tax] rates are for our neighbors, and they are substantially higher.
Take the example of New York City, where Aetna is moving its headquarters. The top marginal tax rate is, last I checked, about 2 percentage points higher than our top marginal rate.
And not only that, but New York City has an income tax, which we don’t have, which adds somewhere around 3 percentage points.
[Editor’s Note: Connecticut’s top marginal state income tax rate is 6.99 percent. New York State’s top marginal state rate is 8.82 percent, and residents of New York City pay a municipal income tax surcharge that adds between 3.59 and 3.88 percentage points.]
The argument that people are moving because of the high taxes on high earners doesn’t make sense if you look where they are moving to.
I understand the perception. It’s not borne out by the facts.
Connecticut’s wealthiest households once faced top tax rates of 7 percent on capital gains and 14 percent on dividends in 1991. Those taxes were rolled that year into the new state income system which imposed a maximum 4.5 percent levy on all earnings.
Has Connecticut’s legislature and news media forgotten that? Do they suffer from a lack of institutional memory?
I think that’s true and understandable. There’s been a lot of change in the legislature since then, so people don’t recall what it was like.
One of the revenue proposals that the (social services) advocates support addressed that and recognizes that, and also that on the federal level capital gains are taxed way lower than regular income.
Taxing a little higher for some of these earnings would still be lower than it was at that time. Those would be reasonable changes which would bring us back to a level that we were at years ago.
Social services advocates haven’t abandoned their push for a more progressive income tax, but they say they’ve focused more heavily this year on what is politically achievable, and that means increasing the sales tax. Is it concerning given that the sales tax generally is recognized as more regressive than the income tax?
First of all I think it’s important to note that nobody I know wants to raise revenue just for the sake of raising revenue. It’s all in the context of a choice: If we don’t raise revenue somehow, we shred the safety net even worse. … But in terms of the different revenue options, what the advocates support is not an increase in the sales tax rate. I know that’s been proposed by one of the caucuses.
[Editor’s Note: The House Democratic Caucus proposed raising the sales tax rate from 6.35 to 6.99 percent. Surcharges also would be imposed on restaurant and hotel transactions to bolster municipal aid.]
That does have regressive effects. The revenue options that are being supported by advocates involve broadening the sales tax onto services … that tend to be for a higher income group that can afford it better. Then it can have a progressive effect.
Given the dire situation and how severe the cuts are really in all of the proposed budgets … we really do have to look at all of these options. But certainly raising taxes on those most able to afford a little more makes the most sense.
You said the cuts to social services have been particularly deep in the last few years. How significant do you believe the rate of erosion to the safety net has been?
Even before we hit this year and the proposed budgets, it was alarming.
We cut off about 19,000 parents from Husky A (state-sponsored health insurance for poor adults with children) in the last budget.
We cut off the parents (with incomes) between 155 and 201 percent of the federal poverty level. At the time that was argued to be OK because they would be able to get (state-subsidized) insurance on the exchange. But it’s common knowledge its often hard for low-income folks to afford even the premiums offered on the exchange.
A very large percentage of them that were assumed to go on the exchange didn’t just based on the economics.
Now what’s being proposed is to cut off an even lower income group.
You’re talking about roughly 9,500 Husky A adults with incomes between 138 percent and 155 percent of the federal poverty level?
Yes. … And I would be surprised if even 10 percent of this group ended up on the exchange.
I think people in Connecticut, like everywhere, are basically good-hearted people. And, as the polling has shown, if it comes down to a choice — paying a little more in taxes or destroying essential services for needy folks — I think people would support paying a little more. And I think the folks who are anti-tax are quite vocal about their position.
But overall, if it’s going to these programs — keeping people out of nursing homes, giving job support to people with intellectual disabilities so they can work, providing health insurance to these 9,500 parents so they can stay healthy and not go into the ER — most people are going to support that.
This interview has been edited for length and clarity.
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