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Yankee Institute Reacts to FY 2006-2007 State Budget
Yankee Institute Reacts to FY 2006-2007 State Budget
Muska Calls Spending Plan "More of the Same"
Hartford, June 8, 2005 -- In response to the budget passed by the legislature and soon to be signed by Governor Rell, D. Dowd Muska, the Yankee Institute's Philip Gressel Fellow for Tax and Budget Policy, offered the following statement:
If I had to describe this budget in a single phrase, it would be: "More of the same."
The budget maintains Connecticut's decades-long policy of both higher spending and higher taxes. This foolhardy trend has done great damage to the state's economy, driven businesses away, and reduced the take-home pay of Connecticut residents who have not yet fled to lower-tax jurisdictions.
Under this budget, spending will rise by a jaw-dropping 8.7 percent next year. Given the state's outrageously wasteful spending on government-employee compensation, corporate welfare, doomed-to-fail "redevelopment" projects, political pork, and subsidies to the arts, the state's budget should be reduced, not increased.
Politicians' willingness to violate the state's "spending cap" is disturbing. Even more troublesome is the treatment given this session to a bill drafted by Rep. Kevin DelGobbo that would have finally defined the terms of the cap, which 80 percent of Connecticut voters favored in 1992. Rep. DelGobbo's bill would have finally put "teeth" into this badly needed fiscal constraint, but the measure wasn't even brought to a vote in the Appropriations Committee.
Connecticut's overburdened property taxpayers shouldn't be fooled by the increases in aid to towns. These additional revenues do nothing to address the real causes of runaway municipal spending. As long as towns continue to face hundreds of burdensome mandates from the state -- and voluntarily raise their own costs with imprudent discretionary decisionmaking -- municipalities' budgets will continue to balloon.
The spending is bad enough, but Connecticut will also face higher taxes as a result of this budget.
It's unfortunate that the governor agreed to impose a state death tax. This levy has been phased out at the federal level -- hopefully permanently. In Connecticut, a death tax will generate a minuscule amount of revenue, but overwhelmingly target hardworking, entrepreneurial folks who have spent their lives acquiring their assets. (Eight out of every ten millionaires did not inherit their wealth, but earned their fortunes.) I find it particularly ironic that the state's elected officials, who claim to favor farmland preservation, support a tax that clearly undercuts this goal.
Hiking the state's petroleum-products tax at a time when the inflation-adjusted price of oil hovers near a record high makes little sense. There are better answers to the state's transportation woes -- for example, market-oriented policies and redirecting unsound spending on little-used bus and rail transit.
Instead of reimposing the corporation-tax surcharge, the governor and legislators should have moved to eliminate the corporation tax altogether. Like the estate tax, it generates very little revenue, but imposes compliance and avoidance costs.
Reducing the amount of the property-tax credits planned for 2005 and 2006 is unforgivable. Property taxes are out of control. (There are now 50 taxpayer groups active at the local level in the Nutmeg State.) Connecticut's residents with property-tax obligations will now face less relief from their income-tax obligations.
Although the news is mostly bad for taxpayers, there are a few bright spots. The governor's unwise proposals to raise Connecticut's "sin" taxes were not adopted. And the massive lobbying push to hike the state's income tax -- perhaps the most growth-unfriendly measure Connecticut's politicians could adopt -- also failed, at least for now.
The combined local, state, and federal tax burden for the citizens of Connecticut is already the highest in the nation. Since 1970, inflation-adjusted, per-capita state spending has soared by 450 percent. Yet despite these scary statistics, in the next two years the state plans to remove over $31 billion from the productive sector are give it to politicians and bureaucrats. That figure is far too high.
This session, the governor and legislators kicked the can of fiscal irresponsibility a little farther down the road. One day reality will force Connecticut to retrace its steps and once again follow the path of spending sanity. The longer we avoid the problem, the more difficult it will be to find our way back.
D. Dowd Muska can be reached at (860) 729-1262 or dowd@yankeeinstitute.org.
D. Dowd Muska is the Yankee Institute's Philip Gressel Fellow for Tax and Budget Policy.
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The Yankee Institute for Public Policy, Inc. is a nonpartisan educational and research organization founded more than two decades ago. Today, the Yankee Institute's mission is to "promote economic opportunity through lower taxes and new ideas for better government in Connecticut." The Yankee Institute for Public Policy, Inc. is classified by the IRS as a 501 (c) (3) public charity. Contributions are deductible to the extent allowed by law.
