Little to show of Lamont's structural change agenda
It has been three months since Gov. Ned Lamont stood in front of the General Assembly to deliver his first budget address. Unfortunately, with two weeks left in the session, little has come of the structural change that he championed. Instead, the 2019 session has appeared to be business as usual.
“When it comes to balancing the budget, my urgent priority is stabilizing the teachers’ pension fund,” Lamont told lawmakers.
But as it did with his predecessor, Lamont’s fellow Democrats in control of the legislature rejected the governor’s call for towns, particularly wealthy ones, to begin contributing to the grossly underfunded pension fund for their public school teachers. The burden will remain strictly the state’s and trying to meet it will eat up an ever-larger chunk of state funding.
The governor was also counting on what he saw as some modest concessions from state labor. Flatly rejected was his call to adjust cost-of-living increases for state retirees. Not yet off the table, but seemingly becoming less likely with each passing day of the session, was Lamont’s desire to set limits on what the state will pay out to hospitals, doctors and clinics for various procedures. Currently, the state is obligated to pay whatever is charged and employees and pensioners have no limits on who they see for care.
Lamont wants Connecticut on a debt diet, but on that count as well he is getting stiff pushback from Democratic legislators.
Instead of pursuing a “budget that tackles our long-term fixed costs,” as Lamont has called for, the legislature again is displaying it has little stomach for addressing, in any substantive way, the pension and debt obligations that eat up one-third of state expenditures and will keep expanding.
Also in his February address, Lamont called on lawmakers “to reform our sales tax for the 21st century,” by canceling sales-tax exemptions on large segments of the service industry, placing it on a level field with retailers that are subject to the 6.35 percent tax. The Finance, Revenue and Bonding Committee instead has proposed only a modest sales tax expansion.
The governor faces an open rebellion on tax policy. With the House Democratic Progressive Caucus leading the way (about half of the 91 Democrats in the House are part of the caucus), the Democratic majorities in the House and Senate want to turn to higher taxes on the rich to balance the state budget.
The attractiveness of this approach is understandable. That’s where the money is, and the wealthy are arguably able to pay more and still live lavish lifestyles. But we agree with the governor that again hiking the tax on the rich could prove self-defeating if many are driven to move to more tax-friendly states.
A proposal from the finance committee would hike taxes on capital gains — both short- and long-term — for individuals making $500,000 annually and couples topping $1 million. That would mean the state’s current top rate (6.99 percent) would be subject to an additional 2 percent on the income tax, yielding a capital gains tax rate of 8.99 percent. If adopted, it would make Connecticut only the second state to adopt a higher rate on short-term capital gains than on ordinary income, and the only state to impose a higher rate on long-term capital gains, according to the Tax Foundation.
The Progressive Caucus would simply raise the highest income tax rates across the board, requiring those making $5 million or more to pay 9.99 percent on that income, those making $1 million or more 8.99 percent, and more than $500,000, 7.99 percent.
For a state trying to build a more pro-business identity, reduce its dependence on the mercurial income tax, and stem the tide of the better off moving out, these tax policies would be a dangerous gambit.
Republicans have offered no alternative budget and won’t support any tax hikes. The Democratic majority must figure this out.
The question is what Lamont does in response to the rebellion. After meeting with Democratic legislative leaders last week, the governor called for “passing a fiscally responsible budget early” and repeated that “the most important work we can do is to stabilize our state’s economy and give businesses the confidence to stay and grow or relocate here.”
We can only hope Lamont’s statements in private were stronger, that he made it clear he won’t accept a more-of-the-same budget. Because if he doesn’t start drawing some lines, that’s what we all will get.
The Day editorial board meets regularly with political, business and community leaders and convenes weekly to formulate editorial viewpoints. It is composed of President and Publisher Tim Dwyer, Editorial Page Editor Paul Choiniere, Managing Editor Tim Cotter, Staff Writer Julia Bergman and retired deputy managing editor Lisa McGinley. However, only the publisher and editorial page editor are responsible for developing the editorial opinions. The board operates independently from the Day newsroom.
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