Making the State Budget Work for Working Families — Part 2

Tom Sevigny is Green Party Candidate for State Senate in the 8th District.

The change in the economy of Connecticut during the last decade is an indictment of the supply-side economic policies of the current state government. By favoring the wealthy over the common person, and favoring industry over municipality, low-income and average-income residents have been seriously injured. This must be changed immediately. The solution is to implement a "Fair Share" state budget, as detailed below.

I. Alter the Budget Cap — An important step in correcting the state budget is to correct the problems that exist with the budget cap:

• First, the budget cap should be modified so that it includes capital gains in calculating income growth.

• Second, federal funds should be removed from the budget cap process so that Connecticut can begin to collect the federal funds which it has been unable to obtain as a result of the cap.

• Third, areas of the state budget which need to grow—such as state funding for education, municipal aid, and health care—should be exempted from the budget cap. In fact, the majority of Connecticut residents support this concept according to a 2001 study conducted by the Center for Survey Research and Analysis at the University of Connecticut.

II. Lower Income Taxes for the Average Connecticut Family — The average Connecticut family has been severely injured by the state budgeting practices of the last decade. To correct this, the state income tax on income below $100,000 needs to be reduced. There are several ways to do this:

• First, simply lower the state tax rate on all income under $100,000.

• Second, raise the floor at which state income taxes are assessed.

• Third, pass an earned income tax credit. This would be particularly beneficial in stimulating the state’s economy.

• Fourth, raise the property tax credit deduction.

III. Lower Property Taxes for the Average Connecticut Family — Another way to assist the average Connecticut family is to lower property taxes. This can be accomplished by:

• First, restoring budget cuts to municipalities.

• Second, increasing state funding for education.

• Third, enabling impact fees on new residential development.

• Fourth, enabling a real estate conveyance tax on new residential development to purchase open space.

Now for the big question: How do we do all this and avoid deficit spending?

I. Maximize Connecticut’s Receipt of Federal Funds — Increase federal revenues by maximizing all reimbursements possible under Medicaid and other federal matching programs. The estimated revenue increase from this is around $100 million.

II. Increase Income Tax on the Very Wealthiest Connecticut Families — The very wealthiest Connecticut families have experienced a tremendous increase in their incomes over the last decade. Now is the time for them to pay their fair share. A 0.5% income tax increase on income over $300,000 coupled with an additional 0.5% increase in income taxes on income over $1 million will generate at least $300 million in new state revenues.

Such an increase is justified by the disproportionately large increase in income among this tiny percentage of our population. In addition, because these tax increases are deductible from federal returns, they will be subsidized by a 30% decrease in the federal taxes on these individuals. Furthermore, this group of individuals will disproportionately benefit from the decreased property taxes that will result from more fully funding education and municipal services from income taxes. Finally, Connecticut income taxes on these top incomes will still be the lowest in the tri-state area. Thus, the wealthy will not feel pressed to leave Connecticut.

III. Sunset or Roll Back Tax Abatements — All tax exemptions need to be reviewed on a biannual basis in accord with the state budget. Only in this way can those tax exemptions and credits which no longer make sense, or never made sense, be removed from the state budget. As a step in this direction, I call for a $400 million reduction in the state tax abatements currently offered on sales and business taxes, with a special emphasis on those abatements which the Office of Fiscal Analysis has determined to be "expedient," or without rational justification. These involve such things as the sales tax exemption for theaters’ lease/ rental of motion pictures, the sales tax exemption for valet parking at airports, the sales tax exemption for amusement services, the sales tax exemption for direct mail services, the sales tax exemption of certain vending machine sales, the sales tax exemption for non-commercial winter boat storage, and the sales tax exemption for gold or silver bullion.

IV. Freeze Changes in the Inheritance Tax, Estate Tax and Gift Tax — I believe that we should oppose tax changes that selectively benefit the rich at the cost of the average Connecticut family. Connecticut revenues would be protected from reduction by freezing the decreases in the inheritance tax, estate tax and gift taxes at their current level. By freezing the changes at the current level, the Connecticut tax structure will be more progressive—hence more equitable—than if decreases continue. Freezing changes in these taxes will create an additional $48 million in revenue.

V. Reverse Transfers from General Fund/ Transportation Fund — This is basically an accounting mechanism to avoid problems with the budget cap because the Transportation Fund is outside of the budget cap and has a surplus. By placing motor vehicle sales revenues back in the General Fund and putting the Town Aid Road (TAR) Grant back in the Transportation Fund, the state will create about $65 million in potential revenue in its budget cap.

VI. Increase or Initiate Taxes on Activities Detrimental to Health or Environment — In general Connecticut should seek to increase its revenue base by selectively taxing activities detrimental to health, at least to the extent that they can be shown to cause state expenses. The classic example of such a program is the tax on cigarettes. Although taxes on cigarettes were increased this past year, these taxes still pay for less than the cost of associated treatments attributable to cigarette smoking. I believe they should be taxed to the full extent.

In addition, Connecticut needs to begin to think in terms of pollution taxes. We should tax pollution and activities that have a negative impact on our environment. Automobiles are a prime example of this. Automobile pollution causes respiratory illness, as does electric energy production through burning fossil fuels. The incineration of waste is particularly harmful to the environment in terms of air pollutants and the production of carcinogens (dioxins) and neurotoxins (heavy metals). These are areas Connecticut should begin to study to develop a rational basis for taxation and as a means of discouraging environmental pollution. "Pollution" taxes could be placed in funds dedicated to the environment, health care and public transportation. This would create a stable funding stream for these important state functions outside of the unstable state budget process.

Summary — The state budgeting process has been disastrous. It has favored corporations and wealth over the average person. We need to make government work for the average person by decreasing taxes on income under $100,000, increasing state aid for education and municipalities to lower property taxes, and sustaining needed state programs.

At the budgetary level, this can be accomplished by altering the state budget cap to allow the maximization of federal funds, rolling back tax abatements which have no rational basis, making the state income tax more progressive, freezing further abatement in inheritance, estate and gift taxes, while increasing the administrative efficiency of government and beginning to develop appropriate taxes on activities which injure health and the environment.

For more information about my campaign, please call me at 860-693-8344, or e-mail <capeconn@attbi.com>.