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Too Small to Keep

Connecticut collects revenue from at least 371 unique sources of revenue, but the bottom 200 don’t even produce 1 percent of total state revenue. Are these really worth keeping? Yankee examines the issue in Too Small to Keep.

The research from the Yankee Institute reveals that most state agencies actually have no idea how much it costs them to collect taxes and fees. But they keep on collecting them.

Yankee recommends that the General Assembly require the administrative costs of tax collection be calculated by agencies and included in the Results-Based Accountability reports that most state agencies submit to the General Assembly. We also recommend the inclusion of sunset clauses in all revenue-raising legislation to force the General Assembly to review and renew revenue sources on a periodic basis.

Too Small to Keep

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Connecticut’s 371 Taxes and Fees

The State of Connecticut collects revenue from more than 371 unique sources according to the latest report from the Yankee Institute. While the cost of government has increased threefold over the past 40 years, the state’s population and median income have failed to keep up. At least part of the reason may be the numerous ways in which the State of Connecticut serves as an obstacle to economic opportunity and growth.

In addition to updating the line-by-line revenue listing and the now infamous chart, Yankee also reminds citizens about the state’s ignominious list of lasts, the numerous rankings on which Connecticut is the worst in the nation.

Check out the full flyer.

Taxes and Fees Flyer

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Yankee PolicyWiki

EAST HARTFORD – The Yankee Institute is pleased to unveil its old research in a new format: the Yankee Institute PolicyWiki. The PolicyWiki brings the Yankee Institute’s award-winning public policy research to an online format familiar to millions of Internet users.

“Read, browse, click, and read again,” said Heath Fahle, the Yankee Institute’s Deputy Director. “The PolicyWiki makes it even easier than ever for the public to access our research.”

The PolicyWiki can be found at http://www.yankeeinstitute.org/policywiki

 

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2012 Policy Guide

Connecticut’s State Motto is Qui Transtulit Sustinet, He Who Transplanted Still Sustains. But over the last twenty years, state trends point to a different reality: He who transplanted is transplanting again to sustain. Connecticut suffered a net loss of 325,526 residents during that time, or about one in ten residents. The transplants are now the people leaving Connecticut, not coming here, and their departure threatens the state’s ability to sustain and thrive in the future.

The top states former CT residents moved to are Florida, North Carolina, Georgia, Virginia, and South Carolina, five states with lower taxes, population density, union membership and cost of living, as well as warmer weather. They took with them an estimated $4.8 billion in purchasing power and $567 million they would have paid in state and local taxes. In the competition for people, jobs, and economic growth, people who used to be Connecticut residents are voting with their feet.

In light of the state’s economic record over last twenty years, the trend is not shocking. Connecticut is one of just three states to experience a net job loss since 1990, including the loss of 77,712 jobs between 2000 and 2010. It perennially ranks among the worst in the United States for business climate, tax burden, and cost of living. Residential electricity rates and gas prices consistently rank at or near the highest in the nation. Elected officials exacerbated these problems in 2011 by enacting the largest tax hike in state history, increasing 77 taxes and fees by $1.9 billion annually.

During this time, public sector unions gained a choke-hold grip over state government, pushing favored initiatives through the legislature like the forced unionization of personal care attendants, home day care workers, and public construction projects while rapidly expanding the size and scope of government. This included a 14% increase in the state employee ranks and a 52% rise in inflation-adjusted state spending in just the last twenty years. Meanwhile, the state employees pension fund is the third worst funded in the country, sowing the seeds for future tax increases.

Connecticut needs to go in a new direction to reverse these trends and prosper again. Connecticut’s 2012 Policy Road Map proposes 26 action items aimed at improving lives through freedom and opportunity.

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Increasing the Minimum Wage

Yankee Institute Policy Brief: Connecticut’s Minimum Wage

Overview:
According to recent news reports, State Rep. Zeke Zalaski (D-Southington) will host a press conference today in which he is expected to announce a proposal to increase the state’s minimum wage. Though well intentioned, this policy option is deeply misguided and will impose yet another obstacle to job growth in Connecticut.

The minimum wage is a “significant cause of unemployment”
“Overwhelming empirical evidence has convinced most economists that the minimum wage is a significant cause of unemployment, particularly among the unskilled.

Among the beneficiaries of the minimum wage law are the more highly skilled workers who remain employed and who can command higher wage in the absence of less-skilled competition. These more highly skilled workers tend to be represented by labor unions, which, not surprisingly, tend to support increases in the minimum wage.” (Stephen A. Landsburg, Price Theory & Applications 5e. United States. South-Western Thomson Learning, 2002. Page 407)

More than 50 years of academic research on the subject has found the disemployment effects of the minimum wage
A February 1995 summary of the issue by the Joint Economic Committee of the US Congress identified 105 studies that supported this conclusion. (Congress of the United States Joint Economic Committee, 50 Years of Research on the Minimum Wage. February 15, 1995. Accessed online on January 31, 2012 at http://www.house.gov/jec/cost-gov/regs/minimum/50years.htm)

But Connecticut’s minimum wage has been increased 32 times since 1951
Connecticut’s minimum wage was increased 30 times between 1951 and 2007 (John Moran, History of CT Minimum Wage, CT Office of Legislative Research Report. June 26, 2006. 2006-R-0410)

Public Act No. 08-92 increased the minimum wage to its current rate of $8.25 an hour. The hike was implemented in two steps, from $7.65 to $8.00 on January 1, 2009 and to $8.25 on January 1, 2010. (OLR Bill Analysis sHB5105 as amended by House “A” Accessed online on January 31, 2011 at http://cga.ct.gov/2008/BA/2008HB-05105-R010727-BA.htm)

In fact, Connecticut “has consistently enacted minimum wages that are higher than the national minimum.”
“Connecticut has consistently enacted minimums that are higher than the national minimum.” (John Moran, History of CT Minimum Wage, CT Office of Legislative Research Report. June 26, 2006. 2006-R-0410)

Since 2000, Connecticut’s minimum wage has been significantly higher than the federal minimum wage (Changes in Basic Minimum Wages in Non-Farm Employment Under State Law: Selected Years 1968 to 2012, United States Department of Labor Wage and Hour Division, Accessed online at http://www.dol.gov/whd/state/stateMinWageHis.htm)

Many other states have not followed Connecticut’s course
Connecticut is one of 18 states with a minimum wage rate higher than the federal rate. A total of 23 states have the same minimum wage rates as the federal. There are 5 states with no state-mandated minimum wage and another 4 states with minimum wage rates set lower than the federal minimum. (Minimum Wage Laws in the States – January 1, 2012, United States Department of Labor Wage and Hour Division, Accessed online at http://www.dol.gov/whd/minwage/america.htm)

Conclusion: Connecticut needs to create new jobs, not kill them
Piled on top of a $1.9 billion tax increase and the adoption of a paid sick leave mandate in 2011, further tinkering with the state’s minimum wage would be another job-killing measure just as the state economy is starting to rebound.

About the Yankee Institute
The Yankee Institute is a think tank that develops and advocates free-market and private sector solutions to public policy issues to improve lives through freedom and opportunity. Founded in 1984, the Yankee Institute is located at our new office in East Hartford, Connecticut. The Yankee Institute is nonpartisan research and educational organization and is classified by the IRS as a 501 (c) (3) non-profit.

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Connecticut’s Taxes and Fees 2012

Graph2012EAST HARTFORD – The Yankee Institute for Public Policy released today the updated version of its Taxes and Fees flyer for Fiscal Year 2010 and 2011. “Connecticut’s state government spending is dramatically outpacing population growth, median income, and the gross state product,” said Fergus Cullen, the Yankee Institute’s Executive Director. “It’s no wonder the state’s finances are a mess.”

 Download the flyer now!

 The 2012 version of the flyer includes an itemized list of Connecticut’s 378 sources of revenue ranging from the personal income tax to the alternate vessel registration license fee – whatever that is. It also includes the percent change for each revenue source compared to Fiscal Year 2010.

The flyer also highlights the recent tax increases implemented last year. State lawmakers implemented or raised 77 taxes by a total of $1.9 billion.

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77 Higher Taxes for Connecticut

HARTFORD – According to a new tally by the Yankee Institute, the State of Connecticut will impose at least 77 separate tax increases over 24 categories as part of the changes recently made by the General Assembly.

1. Raises income tax on individuals making as little as $50K and couples making at least $100K
a. Expands the number of brackets from 3 to 6
b. “Bracket Creep” shifts many taxpayers into higher brackets
c. Highest marginal rate rises from 6.5% to 6.7%
d. Phases out the 3% tax bracket for taxpayers with CT AGI of over 56,500 for individuals, $100,500 for joint filer,
e. Income tax hikes retroactive to January 1, 2011

2. Recapture Provision for high income earners effectively flattens the income tax rate on high income earners for the entire amount of their income

3. Property tax credit reduced from $500 to $300 and phased out for couples over $100,500

4. Sales and Use Tax – Increased the general sales and use tax rate from 6% to 6.35%

5. Eliminates Sales and Use Tax Exemptions for:
a. Hazardous waste removal
b. Valet parking at any airport
c. Yoga instruction at a yoga studio
d. Clothing and footwear costing less than $50
e. Non-prescription drugs and medicine
f. Cloth or fabric for non-commercial sewing
g. Property or services used in operating solid waste-to-energy facilities
h. Yarn
i. Smoking cessation products

6. Expands the Sales and Use Tax to include:
a. Motor vehicle storage
b. Packing and crating
c. Motor vehicle towing and road services
d. Intrastate transportation via limousine, community car, or van with a driver
e. Pet grooming and boarding
f. Cosmetic medical procedures
g. Manicures and pedicures
h. Spa services

7. Estate Tax – Lowers the threshold at which the estate tax applies from $3.5 million to $2 million. The estate tax has eight rates starting at 7.2% for estates between $2 million and $3.5 million up to 12% on estates over $10.1 million
8. Hotel tax – Increased from 12% to 15%
9. Luxury Goods Tax – 7% sales and use tax on motor vehicles costing more than $50,000, boats over $100,000, jewelry over $5,000, and clothing over $1000. Rate applies to the entire cost of the item, not just the amount over the threshold.
10. Rental Car Surcharge – Increased from 6.35% to 9.35% on short term car rentals
11. Alcoholic beverages tax
a. Increases excise taxes on alcoholic beverages by 20%
b. One-time floor tax on alcoholic beverages in inventory as of 7/1/2011
12. Corporate Tax Surcharge – 20% corporation tax surcharge for the 2012 and 2013 income years for companies with at least $100 million in annual gross income in those years and a tax liability that exceeds $250. This replaces a temporary 10% surcharge in law for FY2011.
13. Cigarette tax
a. Increases from $3 to $3.40 per pack
b. One-time floor tax on cigarettes in the inventory of stores as of 6/30/2011
14. Tobacco Products Tax
a. Increased on snuff tobacco from $0.55 to $1/ounce
b. Increases of 27.5% to 50% on all other tobacco products such as cigars, pipe tobacco, etc.
15. Diesel Fuels Tax
a. Increases the base tax on diesel fuel from $0.26 to $0.29 per gallon
b. Imposes a $0.03/gallon tax on diesel in inventory as of 6/30/2011
16. Real Estate Conveyance Tax
a. Increases the real estate conveyance tax rates from 0.5% to 0.75% on the first $800,000 of the sale price of a residential property
b. Increases the marginal tax on nonresidential and residential property over $800,000 from 1.00% to 1.25%
17. Electric Generation Tax – Imposes a new temporary tax of .25 of one cent per net kilowatt hour of electricity generated and uploaded into the regional bulk power grid at Connecticut facilities, except for solar, wind, or fuel cell energy
18. Admissions Tax Exemptions Eliminated – The following locations are no longer exempt from the 10% admissions tax on the ticket price:
a. Hartford Civic Center
b. New Haven Coliseum
c. New Britain Beehive Stadium
d. New Britain Stadium
e. New Britain Veterans Memorial Stadium
f. Bridgeport Harbor Yard Stadium
g. Stafford Motor Speedway
h. Lyme Rock Park
i. Thompson Speedway
j. Waterford Speedbowl
k. Tennis Foundation of Connecticut
l. William A. O’Neill Convocation Center
m. Nature’s Art
n. Connecticut Convention Center
o. Dodd Stadium
p. Arena at Harbor Yard
q. New Britain Rock Cats games
r. New Haven Ravens games
s. Waterbury Spirit games
19. Amazon tax – Requires remote sellers with no physical presence in Connecticut to collect sales taxes on their taxable sales in Connecticut
20. Cremation certificate – fee increases from $100 to $150
21. DMV fee changes
a. Increases fees on late renewals
b. Increases fees on getting a regular drivers license and CDL
c. Increases all vehicle registrations
d. Increases fees paid by violators of certain motor vehicle laws such as speeding, reckless driving, and DUI
22. Hospital Tax – establishes a new 4.6% quarterly tax on hospitals’ net patient revenue
23. Nursing Home Resident User Fee – increases fee from 5.5% to 6%
24. Handicapped Care Fee – establishes a new fee for providers of care to individuals with mental retardation. Currently 5.5% is the Connecticut maximum, but can go up to the federal maximum (currently 6%) as of Oct. 1.

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Gov. Malloy’s Many Tax Hikes

Gov. Malloy’s Proposed Tax Increases

Gov. Malloy has proposed dozens of tax increases across 25 categories of taxes. This is a conservative count; we aren’t counting each separate expansion of the sales tax as a separate tax hike, though of course they are.

  1. Income tax: Increases income taxes on individuals making more than $50,000 a year and couples making more than $100,000 a year; increases the highest income tax rate from 6.5 to 6.7 percent; eliminates the 3% bracket on an individual’s first $10,000 in earnings and a couple’s first $20,000 for those making more than $56,500 and $100,500, respectively; expands the number of brackets from 3 to 8.
  2. Sales tax increase: Increases the state sales tax from 6 percent to 6.25 percent and to 6.35 percent at retail locations.
  3. Sales tax expansion: Applies the sales tax to now-exempt items such as hair cuts, car washes, and clothing and footwear that costs less than $50.
  4. Eliminates Sales Tax Free Week
  5. Property tax credit elimination: Eliminates the existing $500 property tax credit for the middle class.
  6. Cigarette tax: Raises taxes on cigarettes by 40 cents a pack, from $3.00 to $3.40; increase tax on snuff from 40 cents to $1 per ounce; increases tax on other tobacco products from 20% to 50% of wholesale price
  7. Alcohol tax: Raises taxes on alcohol by 20 percent (tax on distilled spirits goes from $4.50 a gallon to $5.40; tax on beer goes from 20 cents a gallon to 24 cents; tax on wine goes from 60 cents a gallon to 72 cents)
  8. Gas tax: Increases the state gas tax from 25 cents a gallon to 28 cents a gallon; and diesel fuel from 26 to 28 cents a gallon.
  9. Earned Income Tax Credit: Increases state spending by more than $100 million though a new, negative income tax of up to $1,700 for low income households that earn less than about $21,500 a year from their jobs.
  10. Death Tax: Lowers the estate tax exemption from $3.5 million to $2 million, making more of an estate subject to the estate tax, which starts at 7.2% and rises to 12%, over and above the federal death tax.
  11. Hotel tax: Increases the sales tax on hotel stays from 12 percent to 15 percent.
  12. Corporate tax: Extends a 10 percent corporate profits tax surcharge on large businesses for two more years (beware those “temporary” tax increases…); establishes “throw back” rule expanding their income subject to state taxation.
  13. Luxury sales tax: Applies an additional luxury sales tax of 3 percent on clothing over $1,000, jewelry over $5,000, vehicles over $50,000, and boats over $100,000.
  14. Driver’s license: Increases the driver’s license tax from $66 to $72, good for 6 years ($1 a year increase).
  15. Car registration tax: Rises from $75 to $80 biennially.
  16. Car rental tax: Rises from 8 percent to 9 percent.
  17. Insurance premiums tax: Increases the insurance premium tax from 1.75% to 1.95%.
  18. Health facilities: Raises taxes on hospitals, nursing homes, and intermediate care facilities for the mentally retarded, in an effort designed to trigger federal reimbursements.
  19. Energy tax: Establishes a new tax of 2/10ths of a cent per kilowatt on electricity generated in Connecticut, with a special interest exemption for favored “green” energy producers. (Editor’s note: A reason to oppose the creation of new taxes of any kind is that they are often increased or expanded in future years. Example: state income tax.)
  20. Real estate conveyance tax: Makes permanent a .25% real estate tax and expands an optional conveyance tax.
  21. Cabaret tax: Creates a new cabaret tax of 3%.
  22. Admissions & Dues Tax: Eliminates exemptions from the 10% tax on admissions to certain places of “amusement, entertainment, or recreation” (eg, New Britain Rock Cats home games, events at the Hartford Civic Center).
  23. Boat tax: Taxes boats at a statewide rate of 20 mills.
  24. Airplane tax: Taxes airplanes at a statewide rate of 20 mills.
  25. Film Tax Credit: Decreases tax credit transferability to 50%, then 25%, against the corporate tax.
    Current Sales Tax Exemptions Eliminated 

    1. Pet grooming services
    2. Automotive storage
    3. Boat services (docking, storage, cleaning, repair, tow)
    4. Packing & crating
    5. Car washes
    6. Automobile road and towing services
    7. Limousine services (with driver)
    8. Labor charges -repair of small aircraft
    9. Clothing and footwear under $50
    10. Non-prescription drugs
    11. Manicure and pedicure services
    12. Eliminate trade-ins exemption for auto vehicles
    13. Eliminate exemption for coupons, discounts, trade-ins
    14. Airport valet parking services
    15. Cosmetic surgery
    16. Haircuts
    17. Yoga Studios
    18. Cloth and fabric purchase for non-commercial sewing
    19. Hazardous waste removal
    20. Eliminate exemption for solid waste to energy facilities

     

    Current Admissions & Dues Tax Exemptions Eliminated 

    1. Games of the New Britain Rock Cats, New Haven Ravens, or Waterbury Spirit;

    Events at:

    1. Arena at Harbor Yard
    2. Bridgeport Harbor Yard Stadium
    3. Connecticut Convention Center
    4. Connecticut Exposition Center
    5. Dodd Stadium
    6. Hartford Civic Center
    7. Lime Rock Park
    8. Nature’s Art
    9. New Britain Beehive Stadium
    10. New Britain Stadium
    11. New Britain V eterans Memorial Stadium
    12. New Haven Coliseum
    13. Stafford Motor Speedway
    14. Tennis Foundation of Connecticut
    15. Thompson Speedway
    16. Waterford Speedbowl
    17. William A. O’Neill Convocation Center

     

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    Growth of State Gov’t Graph

    First featured on our Nickels and Dimes: Connecticut’s Taxes pamphlet, this growth of state government graph over the last four decades highlights how spending has dramatically outpaced median income growth and population growth over the same time period.

    This chart is perhaps Yankee’s most popular item provided to the public at the current time. Candidates for public office, members of the media, and many other regular citizens call, e-mail, or write to request copies of the graph all the time.Taxes and Fees Graph 2010

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    Nickels and Dimes 2010: Connecticut’s Taxes

    The Growth of State Government

    HARTFORD – The State of Connecticut collects money from 347 separate taxes, fees, and transfer payments, according to a new report released by the Yankee Institute. The report lists every separate source of revenue collected by the state, ranging from the state income tax ($6.4 billion) to private donations ($0) for fiscal 2009.

    The top 15:

    1 Personal Income Tax   $6,385,856,437
    2 General Sales And Use Tax $3,194,863,688
    3 ARRA-Increased Medicaid FMAP $2,579,965,883
    4 Medical Assistance-Title XIX $2,579,965,883
    5 Corporation Tax $566,017,816
    6 Gasoline Tax $369,068,334
    7 Cigarette Distributor Tax $312,403,962
    8 Dependent Children $290,246,485
    9 Lottery Ticket Payment $283,000,000
    10 Inheritance and Estate Tax $238,336,664
    11 Mohegan Sun Gaming Payments $200,651,342
    12 Mashantucket Gaming Payments $177,153,621
    13 Motor Vehicle Licenses $175,476,461
    14 Electric And Power Company Tax $153,897,278
    15 Administration-Social Services $144,099,512

    The full report is available here.

    This list also includes revenue from sources like non-returned bottle deposits ($6 million), pistol permits ($1.1 million), permits to sell fireworks ($19,100), registration of hypnotists ($8,010), licenses to trap animals ($5,940), and pool inspection fees ($1,550).

    “Most of the taxes Connecticut collects fall on employers and small business owners in the form of licenses or registration fees. There’s a tendency to think that taxes on corporations or small businesses are paid for by corporations or businesses, but that’s not true. Businesses don’t pay taxes. People do. These taxes are just passed on to regular consumers in the form of higher prices,” said Fergus Cullen, Executive Director of the Yankee Institute.

    “The same is true of money transferred from the Federal government for things like Medicaid or aid to dependent children. That money’s not free. It comes from Connecticut taxpayers, who are also paying interest on that money because so much of it is borrowed,” Cullen said.

    The Yankee Institute supports a simpler, flatter tax system with fewer taxes. The state could eliminate the 200 smallest taxes and fees for just $22 million in revenue on a $19 billion budget.

    Download the flyer now!

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