TO: Jeff Kurz, Editor- Record Journal
FROM: Lou Arata
DATE: March 8, 2018
RE: Time For New Thinking
According to Tax Foundation, Connecticut has the highest total tax burden in the nation. We already have the dubious honor of being the only state in the nation to have both a gift and an estate tax and Governor Malloy wants to add on some more.
From 2005-2015 an extraordinary $6 billion in adjusted gross income (AGI) left this state and migrated to Florida alone- while the Connecticut legislature, along with Governor Malloy’s approval while he’s been in office, raised state income taxes in 1992, 2003, 2009, 2011 and 2015.
With tax payers permanently leaving Connecticut by the thousands and our legislature and Gov. Malloy ever increasing the tax burden on those left, is it any wonder that according to Standard & Poor’s, Connecticut’s credit rating is 3rd lowest in the country? That means it’s going to get harder, much harder to borrow money to possibly assist in getting us out of this financial log jam. Our pensions are the 4th worst funded (2015) and now Malloy’s budget chief, Office of Policy and Management Secretary Ben Barnes, is trying to sell the idea that it makes sense taking the CT Lottery proceeds to bankroll the Teachers’ Pension Fund.
So, what if it were decided that taking that $335 million (+/-) per year, for the next 10 years, was okay for the teachers own pensions? What about all the other departments and services who’ve been receiving that yearly revenue, that serve the rest of us? Like the Department of Education, Libraries & Education Services $104 million, Health & Hospitals $33.4 million, Medicaid $45.2 million, Corrections $27.6 million and State Debt Service $35.77 million, to name a few departmental beneficiaries. The sleight of hand is great for magic tricks, not balancing budgets.
Gov. Malloy has proposed more tax increases on consumer goods- 7 cents per gallon of gasoline, $3 per tire, 25 cents per pack of cigarettes and increasing the real estate conveyance tax, hotel room tax and installing highway tolls. It’s time for new thinking and to get away from the “business as usual” status quo bankrupting the state.
The surprisingly unimpressive politicians who’ve been at the helm for decades, looking out for their own re-election and pensions, need to be replaced by new minds that have the fortitude and backbone to make the hard decisions, actually vote those necessary changes into law and then make sure the laws are followed.
Let’s try adjusting our spending to our revenue, not the failed other way around. Since 1992, Connecticut has had the slowest employment growth in the country and that was the year we began collecting state income tax under then Gov. Lowell Wicker. Perhaps the distinction between politicians and weathermen is closer than one might have thought. Both can be wrong and mislead, but still keep their job. It’s about time we at least change our elected politician’s fate.
One would also think that elected politicians would feel obligated to their constituents to make the financial climate here in Connecticut healthy, where folks would want to live and retire. For that wish to come true, however, we must stop the “tax & spend” philosophy. It’s just got to end. We should eliminate or at a minimum, reduce to competitive levels our corporate income tax, as well as elimination of the state income tax, over a period of years, and eliminate the gift and estate taxes- all of which are crucial components for attracting businesses and retirees.
And about your home- contrary to Mr. Barnes’ remarks when he was discussing Gov. Malloy’s new tax plans, he said, “Addressing our transportation infrastructure, maintaining it and growing it in key ways is going to be the most important thing we can do to assure our state’s attractiveness and real estate values.” Hogwash.
Home prices are stagnating or declining and high tax burdens make it much more difficult for people to qualify for mortgages. Have you driven around nice neighborhoods and noticed the abundance of “For Sale” signs? I suppose Mr. Barnes wants those folks leaving the state to do so on nice roads.
How misguided can Barnes & Malloy be? To make any state “attractive” there must be jobs that pay enough for families to live there. Businesses must be coming into the state, not leaving it, in order for people to work and live in those homes. “Tax and spend” is a short-term arrangement where some win for a while, but if you want everyone to keep dancing, you’ve eventually got to pay the band.
Why is our state government in the business of loaning money to already successful businesses? Is that not what commercial banks are for? And if a bank wouldn’t lend a company money, why in the world should the government be doing it?!
Some of these loans are at below market interest rates and forgivable! Do we really want our state government in the corporate banking business? The state program intended to facilitate large companies’ growth called the First Five Plus Program, since its launch in 2011, has doled out funds to Connecticut corporations providing more than a dozen companies with financial assistance amounting to several hundred million dollars. These loans were given in the form of standard loans, forgivable loans, tax credits and other methods.
Hold on to your hat- Hartford is even subsidizing hedge funds! Gov. Malloy gladly touted Greenwich based AQR Capital’s expansion project participation in the Department of Economic and Community Development’s (DECD) First Five program, providing up to $28 million in loans and up to $7 million in grants to support the firm’s $72 million expansion. They will retain 540 jobs as it creates new ones, Malloy said. Is that really a rational investment of tax payer money or was there something else going on?
DECD also committed $22 million in May, 2016 to help Bridgewater Associates hedge fund – which manages about $150 billion in assets and who’s CEO and founder Ray Dalio, in 2016 earned $1.4 billion – expand facilities in Westport, Wilton and Norwalk. That commitment includes a $17 million loan, a $3 million alternative energy installation grant, and a $2 million job training grant. DECD spokesman Jim Watson said, that for the entire loan to be forgiven, the company must retain 1,402 existing jobs and create 750 new jobs by the end of 2021 and retain them for two years.
If there was already a vibrant, low tax, pro-business environment in place, those hundreds of millions of dollars would never have to be loaned, nor any loans forgiven, in the first place. Those hundreds of millions of dollars could have been better spent on many, many other projects around the state, positively affecting tens of thousands of citizens, not 2,000 hedge fund jobs.
We are the “Gateway to New England” and still have many attributes that other states don’t. For instance, Connecticut has a well-educated populous. We have great schools, where we’re consistently ranked in the top 5 states. We’re 4th in the country for bachelor’s degrees earned and 3rd in the country for advanced degrees earned and we still have a diverse and well-trained work force. We also have an advantageous geographic proximity being so close to both NYC and Boston.
We need to reduce taxes in order to attract businesses so that it is in their best interest (and ours too!) to be here.