Tax hikes rank state fourth in nation on revenue collection list

Hartford - Connecticut collected 15 percent more tax revenue in 2012 than it did in 2011, according to the U.S. Census Bureau.

The state, which collected $15.4 billion in 2012 compared to $13.4 billion in 2011, was fourth in the nation in terms of increases in total tax revenue collection, behind North Dakota, 47 percent, Alaska, 27.3 percent and Illinois, 19.1 percent.

"There is no question. We raised taxes," said Benjamin Barnes, secretary for the Office of Policy and Management. "We certainly did increase tax revenues in the 2011 legislative session. Some of those taxes took effect at various times in 2011, and most revenue began to come in (during) 2012."

The governor's administration and conservative leaning policy groups agree that tax revenues were up in 2012 because of tax hikes and tax exemptions enacted in 2011. The policy groups would like to see lower tax rates so that small businesses can lead the economic recovery. The state should be reducing spending, they say, not increasing taxes.

Connecticut also ranked fourth-highest for increased individual income tax collection in 2012 from 2011. Connecticut collected 13.9 percent more individual income tax in 2012 compared to 2011 - $7.4 billion in 2012 and $6.5 billion in 2011, according to the Census Bureau.

"Our figures don't quite match," said Tom Fiore, section director for OPM. But, he said, "it was primarily due to the tax increase."

According to the Economic Report of the Governor, the personal income tax revenue for fiscal year 2012 was $8.3 billion, a 15 percent increase when compared to 2011's $7.2 billion.

In 2011, the legislature approved tax increases and reduced tax exemptions, actions that were projected to raise approximately $1.4 billion in revenue in fiscal year 2013 and $1.2 billion in 2012. Most of these changes are still in place.

According to the Economic Report of the Governor, the total tax revenues, not including other revenue sources such as casinos and lottery tickets, was $13.8 billion in 2012, a 15 percent increase from $12.0 billion in 2011.

When asked whether any of the tax revenue increase reflected higher incomes and economic growth, Fiore said that when OPM removes the tax changes and one-time revenues, total revenues increased only 0.9 percent.

"When the budget passed (in 2011), we were expecting more than 0.9 percent," Fiore said. "That's why we still have a problem. … This economic recovery has been quite slow. In the end, there was some very, very minor growth."

If there had been a normal recovery, general fund revenues would have grown from 5 percent to 8 percent, Fiore said.

Pete Gioia, an economist at the Connecticut Business & Industry Association, said many states in the middle of the recession cut taxes while Connecticut raised them.

"You do that and you get higher tax collections, but we are lagging in job growth, and believe me, there is a direct correlation in raising those taxes," Gioia said.

Many small businesses are taxed under the income tax because they are not incorporated and don't pay corporate taxes, he said.

"A lot of these people make over $200,000 a year and got whacked," Gioia said. "The money they make isn't just their money; it's the profit of the company."

Small businesses usually lead the job recovery coming out of a recession, he said.

But "we have not seen that, in part because of the major tax increases," Gioia said.

Taking money that would stay in the private economy and moving it to the government leaves less money available for the private sector, said Heath Fahle, deputy director for the Yankee Institute for Public Policy. There is less money to buy labor and invest in capital, he said.

These reduced economic opportunities, lower than expected revenue growth and increased state spending, all contribute to the deficit situation, he said.

Gov. Dannel P. Malloy's proposed budget for fiscal year 2014 is $21.5 billion, which is a 5.1 percent increase from fiscal year 2013.

The personal income growth for Connecticut was only 2 percent in 2012 from 2011, according to the U.S. Department of Commerce's Bureau of Economic Analysis. Personal income growth is the best indicator of the capacity for the state to raise its spending, Gioia said.

"We have a spending problem, not a revenue problem in Connecticut," Gioia said. "Whenever you are going above the raise in personal income, you are really out of whack with what taxpayers can afford."

j.somers@theday.com

Tax collections nationwide

According to the U.S. Census Bureau, state government tax collections increased by $34.3 billion from fiscal year 2011 to a record $794.6 billion in 2012.

Overall, state tax revenue on individual income was at $280.4 billion for 2012, up 8.1 percent from 2011, while general sales tax revenue was at $242.7 billion for 2012, up 2.9 percent from 2011. License tax revenue increased to $54.0 billion for 2012, up 4.7 percent from 2011.

Connecticut was fourth among states in total tax revenues collected: North Dakota, 47 percent; Alaska, 27.3 percent; Illinois, 19.1 percent; Connecticut, 15 percent.

The state also had the fourth-highest percentage increase in revenue from individual income taxes: Illinois, 39.8 percent; Hawaii, 23.5 percent; Oklahoma, 16.3 percent; Connecticut, 13.9 percent.

Source: 2012 Annual Survey of State Government Tax Collections from the U.S. Census Bureau

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