By Reginald Johnson
There’s a sorry
spectacle going on right now in Connecticut,
the wealthiest state in the nation.
The state’s
governor and some mayors are going around like paupers, hat in hand, saying
they’re broke and can’t pay the bills.
Gov. Dannel P.
Malloy told the legislature that revenues are down this year, and as a result
there needs to be $570 million cut in the state’s two-budget. Malloy is
proposing to lay off 1,000 people from the state workforce, and has told agency
heads to come up with ways to cut their budgets by over 5 percent. The governor also said higher education has
to be cut by $40 million.
In the state’s
largest city, Bridgeport, Mayor
Joseph P. Ganim said the city is facing a $20 million budget deficit. Ganim is
hinting that union contracts may have to be “restructured” --- meaning wages
and benefits will have to slashed.
Bridgeport schools
--- which are funded with both city and state money --- are also facing a
financial crisis. Schools Superintendent Fran Rabinowitz said the system has a
$15 million budget deficit.
You would think that
in a state like Connecticut, you
wouldn’t hear these cries of poverty. Connecticut
has a lot of wealth. The state is number one among all states in
per capita income. It is ranked one of the highest in median household income.
It is the home of many billionaires, some multi-billionaires.
The state is home to
many Fortune 500 corporations which enjoy substantial profits.
All that personal
and corporate wealth could be taxed a lot more, but it's not.
Right now, corporations pay at a modest 9 percent rate on their income. Taxes from corporations account for just 4.6 percent of the state's revenue.
For wealthy residents of the state, Connecticut's income tax is really not much of a worry. The top income tax rate for the state's highest earners is 6.7 percent.
For wealthy residents of the state, Connecticut's income tax is really not much of a worry. The top income tax rate for the state's highest earners is 6.7 percent.
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| A mansion in Southport. Connecticut has the highest per capita income in the nation. |
Politics has a lot
to do with why the rich and big corporations aren’t taxed more. Large companies
and the wealthy spread their money around for political candidates, and those
who benefit are averse to raising taxes on their donors. The attitude is, don’t
bite the hand that feeds you.
Corporations and
wealthy individuals also scare state officials by talking about leaving Connecticut
if taxes are raised.
Citing the decision
by General Electric to pull its headquarters out of Fairfield
and relocate to Boston --- a
decision company officials said was driven in part by the lure of a better tax
deal in Massachusetts --- Gov.
Malloy said the state must avoid raising corporate taxes and keep Connecticut
‘business friendly.’
It is true that in
some cases big corporations and a few very wealthy people will leave Connecticut
if their taxes go up. There’s no question that corporations around the country for
years have played the game of “hopscotch” --- jumping from one state to
another, or even leaving the U.S. altogether,
to go where there’s a better tax deal, or where wages are lower. Corporations hold states hostage with their threats to leave if taxes are raised.
It’s going to take
some changes on the federal level to start restricting the ability of
corporations --- those that are
profitable and employ a lot of people --- to just up and leave a state and go
somewhere else simply to make more money. What’s needed is a law that provides for
a stiff financial penalty to be levied on a corporation that wants to
leave. One idea is to pass a law which requires corporations to pay a 40 percent charge on profits to the states they're exiting.
Such a penalty would make some corporations
think twice about leaving, or if they still wanted to move, it would at least
give the state they were leaving some compensation for the economic hardship
the company was causing
Unfortunately, that
type of penalty is not in place yet. Hopefully, penalties or other restrictions on corporate activity will be put into
effect as more and more people see the harm that corporations cause through
relocations.
But right now Connecticut
has to deal with the cards it’s been dealt. Even though it’s a risk, I believe corporations should be made to pay more. Surely, it would not be that onerous that companies pay another 1
percent, boosting the corporate income tax rate to 10 percent.
And wealthy
individuals can certainly pay more than 6.7 percent on their state income tax bill. A 10 percent rate would
be appropriate. A person making say $5 million in a year, and there’s plenty of
those here, would pay $500,000 to the state. I think that person would still have a lot left over, even after paying federal taxes.
The need to raise additional
revenue from corporations and the wealthy is a moral issue
as well as a practical one. Those who are able to pay more should pay more, simply
because there’s less hardship for them to do so.
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| People waiting for food donations in Bridgeport. The city has high social service costs and a weak tax base. |
Ideas being tossed around now like raising
the sales tax rate, bringing tolls back, or increasing various use taxes to close the budget deficit only
penalize the middle class and poor --- those least able to pay.
Another key step
has to be taken to raise more money for government operations, particularly on
the local level. Tax exemptions have to be ended for private universities or colleges that are financially well-off. The tax exempt status for churches and houses of
worship also has to end.
Cities like Bridgeport
and New Haven are losing huge
amounts of money due to tax exemptions. Yale
University in New
Haven, which is very well endowed, is a prime example
of a tax exempt institution that is getting nearly a free ride in terms of
paying for both local and state services.
Yale has an endowment of $25.6 billion. The
college also has.$2.5 billion worth of properties throughout New
Haven, according to city officials. But the university
doesn’t pay a dime in local property tax.
While Yale does make
voluntary payments to the city for police and fire services, that amount is far
less than what they would pay in property taxes if the college was not tax
exempt. (Educational institutions are tax exempt under state law).
All in all, Connecticut has the potential to garner a lot more revenue to fund needed government operations. The political will has to be summoned to make the needed legal changes to do this.
The mantra you hear from leaders like Gov. Malloy that somehow a well-off state like Connecticut "can't afford" to pay for higher ed and needed social services is completely wrong.
People should not stand for it.
All in all, Connecticut has the potential to garner a lot more revenue to fund needed government operations. The political will has to be summoned to make the needed legal changes to do this.
The mantra you hear from leaders like Gov. Malloy that somehow a well-off state like Connecticut "can't afford" to pay for higher ed and needed social services is completely wrong.
People should not stand for it.
