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The Sad Saga of Taxation in Connecticut August 21, 2008 A treasured myth of Connecticut’s left-wing elites is that the blame for the state’s enormous tax burden -- the worst in the nation, when measured as the share of personal income grabbed by all levels of the public sector -- lies with the federal government. Since wages are generally higher in Connecticut than in the rest of the nation, and the federal tax code’s “progressivity” escalates rates as income rises, the state’s workers are indeed hit with larger levies than most Americans. But Washington’s role is only part of the story. There’s plenty of blame to be placed at home. The Tax Foundation, an independent, nonpartisan, D.C.-based organization with no desire to either praise or punish Connecticut, recently reported that only New York and New Jersey impose higher combined state-local tax obligations. Connecticut ranks third in the nation as the worst hellhole in this category -- 11.1 percent of the income earned in the Nutmeg State is sent to Hartford and city/town halls. (On a per capita basis, the burden is $7,007.) It wasn’t always this way. Thirty years ago, Connecticut’s state-local tax obligation was lower than the national average. It’s a reminder of how much life has changed for Nutmeggers in the last few decades. To justify the agenda they push today, the state’s lefties have successfully rewritten history, and crafted an image of Connecticut as a longstanding socialist nirvana. Don’t buy it. The Land of Steady Habits was once a place with rather frugal government. Municipalities stuck to basic services, and didn’t embrace “mission creep.” The story was the same in Hartford -- in 1970, state government spent five times less, adjusted for both population and inflation, than it did 35 years later. And in a state bereft of the multitudinous “public services” we receive today, through what was surely an act of divine beneficence, families prospered, the state’s population grew, and young adults could afford to live in their hometowns. Two policy shifts did much to alter this picture. The first took several decades to skew Connecticut’s fiscal-policy bearings, while the destructive economic effects of the second were felt very quickly. In 1965, local-government employees were permitted to “bargain collectively.” Ten years later, the same privilege was granted to state employees. No longer were bureaucrats willing to trade lock-tight job security for so-so compensation. Led by militant union bosses, they demanded -- and won -- not just all-but-guaranteed employment, but benefits and wages that were substantially superior to those offered in the private sector. Most of the dues revenue union bosses received was spent not on contract negotiations and “grievance” procedures, but politics -- e.g., agitprop, legislative testimony, phone banks, and get-out-the-vote drives. The tens of millions of dollars raised annually by Connecticut’s public-sector unions played a huge role in building an effective liberal infrastructure. The state’s Democratic Party, soon to be free from the dominance of “Greatest Generation,” blue-collar leaders and voters, fused the collectivist utopianism of pampered Baby Boomers with the naked self-interest of government employees, and became a formidable force. (Connecticut’s Republican Party had neither the brains nor the gumption to oppose this anti-taxpayer behemoth. It still doesn’t.) By 1991, liberals had acquired enough resources to impose a tax once considered unthinkable, because, in the words of The Wall Street Journal, “Connecticut has an enduring distinction as a tax haven from its neighboring states.” A broad-based income tax squeaked through the legislature, as part of a deal that reduced the corporate tax. Nearly two decades later, it’s clear that 1991’s tax shift was a colossal blunder. Connecticut has fewer private-sector jobs today than at the start of the recession that helped cause 1991’s budget battle, and median household income (half earn more, half earn less) has plummeted. As for the deal cut with lobbyists for Big Business, a 2006 legislative report found that it’s “difficult to demonstrate whether the measures taken … to reduce the corporate income tax have produced the desired results.” A tax on personal income was the final step in making Connecticut’s public sector exorbitantly expensive. From a ranking in the bottom half of states in 1978, the tax burden imposed by government in Connecticut soared to the third highest in America in 2008. Some say it’s too late to save Connecticut from its tax-and-spend ways. Maybe. But looking backward suggests there was a time when fiscal prudence ruled. Perhaps there are enough citizens left who will learn from the past in order to save the Nutmeg State’s future D. Dowd Muska is a writer, commentator and public-policy researcher. His website is www.dowdmuska.com. # # # # # |
