Fairness requires responsible spending
Two Connecticut think-tanks - the liberal Connecticut Voices for Children and conservative Yankee Institute for Public Policy - are having quite an intrastate smackdown over the fairness of the state's tax code.
At issue in the dispute is whether wealthy Connecticut residents pay their "fair share" in taxes. Unsurprisingly, the liberal Voices argued that they do not, and that the state should therefore raise taxes on the wealthy. The conservative Yankee Institute, of course, argued that the wealthy pay more than their fair share and Connecticut should repeal or scale back the earned income tax credit, which transfers money to low-income taxpayers.
Unfortunately, when it comes to addressing Connecticut's current fiscal challenges, this entire debate over tax burdens misses the boat. Connecticut should not be increasing taxes on anyone, rich or poor, until the government begins to responsibly manage the revenues it already has.
Wasteful spending is built into the structure of Connecticut's budgeting process. Even as the state's population is shrinking, the budget includes an automatic annual increase of about 4 percent to all spending. Budget "cuts" are made not against the previous year's expenditures, but against this ever-expanding annual baseline. If the state instead held the baseline flat each year and increased spending only where necessary, it would save taxpayers hundreds of millions of dollars and allow government to focus new spending on high-impact investments in education, infrastructure, and poverty reduction.
This wasteful approach to budgeting is exacerbated by the state's addiction to debt. In spite of our perennially increasing taxes, Connecticut has managed to accumulate the highest per capita debt in the country to go along with $60 billion of unfunded public pension liabilities. What have we gotten in return? No net job growth in the last two decades.
The 2013 budget will include nearly $3.5 billion - about 15 percent of total spending - for debt service and funding state employee retirement accounts. If the state doesn't aggressively work to reduce future pension obligations and adopt a prudent approach to issuing bonds, taxpayers will be on the hook for even more in future years.
Raising taxes not only would fail to address these underlying drivers of our perpetual budget deficits - it would likely make things worse by further stifling a stagnant state economy.
Connecticut Voices for Children argues that Connecticut's taxes aren't overly burdensome because they are lower than New York's. But it is na´ve to think that in today's economy New York is the only state Connecticut is competing with for jobs and investment. Connecticut is competing with states around the country. And most states with strong records of job growth levy lower taxes on workers.
Perhaps the strongest argument against raising Connecticut taxes is that it has just been tried and failed. The fiscal crisis comes two years after the largest tax increase in state history.
Those concerned about resolving Connecticut's fiscal predicaments should advocate not for new taxes, but for responsible spending. They should advocate for fair budgeting that focuses spending increases on programs that deliver the greatest impact, rather than automatically increasing everyone's budget. They should advocate for a bond commission that doesn't issue debt as though Connecticut can print money. And they should advocate for a government that doesn't prioritize the economic interests of public unions over those of everyone else, especially middle-income private sector workers and union members.
Until we address these underlying drivers of Connecticut's fiscal and economic woes, our budget deficits will keep reappearing while jobs remain nowhere to be found. That is not a fair outcome for anyone.
Ben Zimmer is executive director of the Connecticut Policy Institute.
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