Malloy’s Mixed Bag

After staying up late a couple of nights to talk about it, Connecticut’s legislators this week approved Governor Dannel P. Malloy’s $40.1 billion biennial budget, which includes a breathtaking $2.6 billion in tax increases over the next two years. The startling thing about the tax increases, however, is not so much their size, which is considerable, but that they exist at all in this time of anti-tax fervor. The governor explains that as a part of his mixed budgetary bag of so-called revenue enhancements and spending cuts, the new taxes comply with his doctrine of sharing the pain as the he seeks to fill yawning budget gaps and stabilize state finances.

In unabashedly embracing tax levies as a tool refloat Connecticut’s foundering finances, Gov Malloy is zigging where other governors have zagged. Andrew Cuomo in New York and Chris Christie in New Jersey are giving new taxes a wide berth this year, as are governors in 42 other states, trying to balance budgets by cutting state services and jobs. The no-new-taxes gambit clearly pays immediate political dividends; both Cuomo and Christie are riding high in the polls in their respective states. Malloy may have a rougher ride here in Connecticut. But he is banking that a quick return to stable finances and steady and predictable levels of state services will pay statewide economic dividends, making this initial investment of new taxes on incomes and a long list of goods and services — from alcohol to yoga lessons — seem worthwhile.

For those looking for silver linings, there is one immediate dividend in the new state budget for local property tax payers. It maintains state aid to towns and cities and allocates revenues to municipalities from new sales, luxury, and real estate conveyance taxes. This comes as good news for towns like Newtown that are having difficulty funding their own budgets.

What makes this such a gamble for new Democratic governor and Democratic majorities in the Senate and House, however, is that they are making a high-profile commitment to this mixed-bag approach to budgeting when all they have in their bag so far are higher taxes. No one knows the ultimate outcome of the governor’s negotiations with the state’s unions over the other key component of the budget: more than $2 billion in concessions from public employees. We will believe it when we see it. Without those concessions, the state will have to embark on same path of widespread layoffs, deep spending cuts, and safety net shredding New York and New Jersey have taken — only Connecticut residents will have the added insult of higher taxes along with all the other sacrifices. The bag will be anything but mixed, and state taxpayers will be left holding it.