Connecticut’s unlikely benefactor: the U.S. Supreme Court
In a state normally characterized as being “deep blue” politically, Connecticut may have received some relief to its well-publicized fiscal woes from what most would consider a very unlikely source: The conservative-leaning United States Supreme Court.
While many newspaper headlines have focused on the court’s rulings involving a Colorado baker’s refusal to bake a same-sex couple’s wedding cake and President Trump’s travel ban, two other decisions, less likely to stir political passions, should be “above the fold” in the minds Nutmeggers.
In Murphy v. National Collegiate Athletic Association, the justices struck down the Professional and Amateur Sports Protection Act of 1992 (PASPA), citing that it violated the 10th Amendment’s anti-commandeering doctrine. The decision clears the way for all states to legalize and tax sports betting.
In South Dakota v. Wayfair, Inc., a sharply divided Supreme Court invalidated a 26-year-old precedent known as the “Quill Doctrine.” Under Quill, the court ruled a state’s attempt to impose sales taxes on a company that had no physical presence in a state violated the Constitution’s (Dormant) Commerce Clause by placing an undue burden on interstate commerce.
With regard to Murphy, there are both skeptics and optimists predicting the impact of sports betting on Connecticut’s coffers. The Office of Financial Analysis’s (OFA) review of SB 540, the General Assembly’s most recent effort to regulate sports betting, provided only modest estimates, i.e., that the Connecticut Lottery Corporation could see an increase in revenue from sports betting of up to $16 million by FY 2023. However, more optimistic prognosticators have cited the figure $2 billion for potential sports betting activity in the state. That figure portends to yield significantly higher tax revenue than cited in the OFA number.
Respecting Wayfair, the Department of Revenue Services estimates that Connecticut loses up to $200 million annually due to noncompliance and the difficulties associated with collecting sales and use taxes from online and remote purchasers.
Paradoxically, both 10th Amendment and Commerce Clause rulings have long been thorns in the sides of conservatives. Interpretations of both Constitutional passages have historically triggered expansions of federal power. Scaling back that power has not instinctively elicited cheers from Democratic elected officials.
Both decisions, while mostly falling along ideological lines, had some surprises. In Wayfair, two judges you might think rarely spend time in the same room, let alone the same opinion − Ruth Bader-Ginsburg and Clarence Thomas − sided with the majority (Chief Justice Roberts wrote the Wayfair dissent). In Murphy, Justices Kagen and Breyer joined the conservative majority (Breyer, in part). Connecticut's Democratic governor, Dannel P. Malloy, also applauded Wayfair as leveling the playing field between online vendors and traditional brick and mortar retailers.
In addition to opening up the Capitol’s revenue spigot, the two rulings could change the dynamic of political posturing in Hartford. Rather than the usual tug-of-war, “a spending problem vs. a revenue problem,” an infusion of revenue could encourage compromise to address some of the state’s systemic problems.
New monies might relieve some of the short-term stress from the largest weight around the state’s fiscal neck − current and future debt, pension and health-care costs for state workers. As noted by the report of the Commission on Fiscal Stability and Economic Growth, 35 cents of every state dollar goes towards these “legacy costs.”
So, while a decision whether a baker can or cannot be compelled to make a cake for a same sex couple stirs more passion and garners larger headlines, the more arcane Murphy and Wayfair decisions may, in fact, provide the recipe for alleviating Connecticut’s perennial budget problems.
James V. Bellano is the Economic Development Director for the Town of Windham.
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