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Lamont's no-tax-hike budget bets on economic growth

Gov. Ned Lamont sent a clear reminder Wednesday about who sets the policy agenda — him. After several weeks of the progressive wing of the Democratic Party, led by Senate President Martin Looney, unveiling various ideas for taxing the rich and distributing aid to cities and schools, Lamont made it clear that isn’t happening.

Instead, Lamont unveiled a no-tax-increase budget. It leans heavily on expectations of increased federal aid and the use of a record $3 billion budget reserve if necessary. It depends less so on the anticipation that marijuana will be legalized for recreational use and online sport betting approved, both generating added revenues.

Spending would increase to $22.6 billion next fiscal year, 2% growth, and $23.4 billion the second year of the two-year budget, another 3.5% increase. The increases are driven in large part by legacy expenses — funding the state’s pension and debt obligations. The spending plan would also erase $1 billion deficit projections in each of the next two years.

Lamont’s argument for his policy approach is sound. Connecticut has done a better job than many states in limiting the economic damage caused by COVID-19 and in managing the crisis. He sees the state as poised for economic expansion as vaccines are rolled out and the economy more fully opens. Lamont contends tax increases would act as a drag on that anticipated growth and detract from his message that Connecticut is open for business and for new families.

It could be argued that since the wealthy, investor-class has done just fine during the pandemic, that it could well afford the capital gains and “mansion tax” that Looney has advocated without any detrimental economic damage. And there are certainly needs, such as helping the underfunded nonprofit agencies that provide many of the state’s human services programs, directing more aid to urban centers that suffer under an inequitable property tax system, and addressing poor student performance in inner city schools.

But as Office of Policy and Management Secretary Melissa McCaw noted, in response to a question about Lamont’s opposition to higher taxes on the wealthy, “We want those wealthy Connecticut investors in Connecticut.”

“This is about the long game,” added McCaw, after giving the Connecticut news media an overview of the budget proposal. The state, she argued, will only regain solid fiscal footing through sustained economic growth. Higher taxes, particularly coming out of a pandemic, work against that goal, she said.

Or as Lamont put it in his budget address, “We don’t need more taxes, we need more taxpayers.”

Our expectation is that this approach will sustain the popularity Lamont has gained from his handling of the COVID-19 crisis. And speaking of the long game, if Lamont can head into a 2022 re-election with a growing economy, and having not raised taxes, he could end up well positioned to lead the state in a second term.

There is no sign the administration will compromise on its no-tax-increase approach. Any effort by the Senate to place a tax-increase proposal on his desk seems doomed to die in the House. Last Thursday the Moderate House Democrats caucus, or Blue Dogs, representing about 25 lawmakers, stated: “Now is not the time to increase the tax burden on the residents and businesses of the State of Connecticut.”

It was disappointing there were no substantial ideas for property tax relief. Lamont did propose $100 million in additional aid for the state’s most distressed communities, including New London, Norwich, Montville and Preston. That would provide some modest help. And the proposed budget would otherwise keep municipal aid steady. Any real structural change in property taxation — a plank in his first campaign for governor — will apparently have to await a second term.

While Lamont is not attempting to renew the toll debate, he does call for “mileage fees” on large trucks, based on weight. It would raise $90 million annually, details to follow. The administration also wants the legislature to approve Connecticut’s participation in the multi-state Climate Initiative Program. CIP essentially slaps a fee on large fuel suppliers for the emissions their products generate, encouraging them to achieve lower-carbon content. That would bring in an estimated $80 million.

Some of these costs will be passed onto consumers, but Connecticut needs transportation funding, and this approach could prove more politically palatable than tolls.

Overall, the Democratic governor has produced a budget proposal likely to be more popular with the general public than with many in his own Democratic caucus. Politically and policy wise, that’s not a bad place to be.

 

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 Izaskun E. Larrañeta, staff writer Erica Moser 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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