The budget problem is that we can’t agree on the problem
I’ve got some bad news. My prognosis for budget negotiations is fairly dire. It is not because the legislature is lazy, or because of political posturing. It is because we do not agree on the problem.
Of our tentative $2.6 billion budget deficit, over half is a result of past lawmakers abdicating their responsibility of fully funding the pension obligations. The remainder comes from anticipating significantly more revenue from the income tax than we actually received.
While, many of my peers are determining ways to punish the middle class and our state workers, I would like to direct our attention to the wealthy. The ones who have direct access to politicians. Who pay half or less, as a percentage of income, than what the rest of us pay. This, while the top 1 percent of Connecticut income earners obtained 84 percent of the income gains over the last few decades, while the rest of our wages stagnate or decline.
It is not just Republicans who do not want to tax the wealthy in Connecticut. It is a wide contingent of Democrats, as well. Their main arguments are oft repeated, and always wrong.
The first argument that we cannot tax our wealthy is because of the specter of them leaving our state. In 2016, a report by economists Young, et al., came out showing that over a 25-year period, state income tax rates did not substantially affect interstate migration of the wealthy.
More to the point, we have approximately 12 percent more millionaires than we did in 2010. We are losing swaths of residents who make $50,000 or less, but gaining residents who make $100,000 or more. When people loudly ruminate about people leaving the state make sure they recognize that it is specifically the middle class who are leaving.
These are the facts, despite income tax increases in both 2011 and 2015. Often billed as the “largest tax increases in our state’s history” (which defies logic and reason given that the top tax bracket increased less than half a percent in aggregate), wealthy people still managed to accrue within our boundaries. And remember, Connecticut is No. 1 in per capita income, whereas Florida is No. 31. For all of our hand wringing, we are doing exceptionally well with regard to keeping our wealthy happy.
The second argument is that relying on the income tax is too volatile, and too difficult to make reliable projections. The answer from some politicians, with a nod and shrug, is to say that we simply can’t rely on the income tax. I disagree.
The income tax is that only vehicle to ensure that there is tax fairness. What we ought to be doing is building in a 5 percent buffer for our budget, and not just attempt to balance the budget. Any excess can go to paying for our promises and building the rainy day fund back up; and when times are lean, we have a built-in safeguard against miscalculations or market downturns. Any business owner knows that you need to be conservative with revenue projections, and we could bring that mentality to government.
A third argument is that taxing our wealthy will limit the growth of our taxable base. This self-serving fiction, pushed by conservative think tanks for decades, uses simplistic supply-side doctrinism to argue that giving wealthy people tax breaks creates new employment opportunities, increases productivity, and grows the economic pie for everyone to benefit.
In reality, the fruits of the labor force are going directly to capital owners, and the only way to remediate this effect is to increase the minimum wage, provide competitive wages from the state, and increase taxation on the wealthy. Our millionaires need only so many loaves of bread. Every dollar that goes into the pocket of someone making $50,000 or less is recycled back into the economy. The same cannot be said for every dollar going back to a millionaire.
A fourth argument is that taxing the wealthy punishes success. Let me be very clear: no millionaire gets there alone. The burgeoning wealth of the upper class in the 1980s and beyond was possible due to investments made for four decades. Investments in education, infrastructure, and information technology – only possible through strong government and progressive taxation. The idea that the wealthy work harder than the rest of us is factually inaccurate.
Talk to a single mother who works 80 hours a week just to keep the electricity on, then tell me that someone works remotely as hard by watching the stock market ascend. Taxing the wealthy is not about punishing the rich, it is about recognizing that once income far outpaces basic needs, you ought to be contributing a bit more to the society that made this possible.
Lastly, there is the argument that increasing taxes on the wealthy will simply be flouted by new tax avoidance schemes. There is the fear that our wealthy are renting houses in Florida and declaring income in a different state, while still participating in the Connecticut marketplace and benefiting from our high quality of life. Refusing to tackle this problem is like Norton anti-virus throwing up their hands and refusing to go after new viruses simply because there will be new ones after every new update. We are legislators, and it is our damn job to fix these problems. If you live in Connecticut, then you pay Connecticut income tax, period. Having a household in Connecticut is enough of a nexus for us to tax someone.
We can solve our deep, structural inequities, but only once we all get on the same page as to the problem. Legislators will not do the difficult, but right, thing until they are pushed – and the urban legislators already understand what is necessary.
We need residents of the state to push legislators on the shoreline, in wealthy enclaves, and in small towns. Until we get the legislature on board, you can expect an austerity budget reducing services for the middle class, while simultaneously raising their taxes. The only ones who won’t be feeling the heat under the current governor’s, Democrat’s, and Republican’s budget will be the wealthy.
That is not right.
State Rep. Josh Elliott, a Democrat, represents Hamden, the 88th legislative district.
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