Commentary––

Back To The Future For Connecticut:

A Heavy Sales Tax On Top Of Income Tax

By Chris Powell

Connecticut couldn’t be in much worse of a mess. Despite income tax increases and the manipulation of state budget accounts last year, state government’s finances continue to collapse and the deficit grows. While the General Assembly seems ready to outlaw smoking in bars and restaurants and otherwise meddle in everybody else’s business, most legislators remain in denial about their own, and a large minority is eager to repeal the state Constitution’s limit on spending or to drill more holes in it. And now Governor Rowland seems incapacitated by scandal.

The governor’s former deputy chief of staff has pleaded guilty to unspecified federal bribery charges involving the award of state contracts. The governor himself has admitted using a Republican Party credit card for personal expenses but refuses to explain the scope of his conduct or the possible consequences to himself under tax law and ethics regulations. His musings the other day about seeking a fourth term, after having forsworn the possibility last year, struck even his friends as a pathetic gesture at regaining relevance, and prompted only mockery from his enemies, not new respect.

While Rowland has presented the legislature with a tight budget including a few structural reforms, he has done little to support them and they are being ignored. He seems willing to react to whatever the legislature does, whenever it does, if ever it does.

What’s Connecticut to do?

The likely path of least resistance was sketched out the other day by House Speaker Moira Lyons, who suggested raising the sales tax by a half point to 6.5 percent. Tax-hungrier Democrats are talking about taking the sales tax to seven percent if they can’t get the governor to approve another increase in income taxes.

When the income tax was enacted in 1991 its great rationale was “tax reform,” a profound reorientation of Connecticut’s tax system toward profitability and wealth and away from mere transactions, like sales. The spending limit amendment to the state Constitution was offered to the voters at referendum a year later as a promise that the profligacy of state government in the 1980s wouldn’t happen again.

The income tax raised a huge amount of new money and a little of it was returned to the taxpayers by reducing the sales tax from 8.5 percent to 6 percent, which was still steep. But the income tax quickly facilitated another explosion in state spending and bonding in the 1990s, elected officials quickly forgot that good times don’t last forever and that tax revenue fluctuates with economic cycles, and now state government has managed to outrun the income tax just as it outran the sales tax.

So Connecticut may go back to a heavy sales tax system and plunk it on top of its heavy income tax system. And though suggestions of corruption abound, on top of expensive failures of ordinary public administration, from the Connecticut Resources Recovery Authority to the Department of Children and Families to drug criminalization to government labor relations, there is no impetus in state government for stepping back to inquire whether anything should be done differently, or maybe not done at all.

Republican legislators can’t think of much to do besides pledge their refusal to repeal the spending cap. Insofar as there is any leadership in the Democratic majority in the legislature, it is all for raising taxes. And the several Democratic state constitutional officers who are considered possible candidates for governor in 2004 –– Attorney General Richard Blumenthal, Secretary of the State Susan Bysiewicz, and Comptroller Nancy Wyman –– have nothing to say about Connecticut’s dire circumstances, nothing to say even about the Rowland administration’s corruption, which would be an easy target if only for partisan purposes. The leading Democrats apparently do not yet see any reason to lead.

Not that it would be such a disaster if the governor held out against the minimum tax increase legislative Democrats would settle for and a long stalemate on the budget developed. In that case more authority over spending would default to the governor. Instead of trying to whip legislators and the public into submission by closing state parks in the heat of summer, as his predecessor did, Rowland should try closing things the public would never miss, like the Education Department and the Permanent Commission on the Status of Women. Even in hard times state government is still full of such stuff.

(Chris Powell is managing editor of the Journal Inquirer in Manchester.)