(Hartford Courant) Sen. Kane: “ You can’t tax your way to prosperity. It just doesn’t work.”

Article as it appeared in the Hartford Courant

With Guns Finished, Legislators Now Tackle State Budget Deficit

By CHRISTOPHER KEATING, [email protected]
The Hartford Courant
5:07 PM EDT, April 6, 2013

After focusing intensely on gun control for the past three months, state legislators are now turning their attention to another major issue: solving a state budget deficit that is projected to be near $1 billion in each of the next two years.

They are hoping to figure it out by June 5, the scheduled end of the legislative session.

Lawmakers will debate Gov. Dannel P. Malloy’s proposals to eliminate the property tax on most cars, eliminate the state sales tax on clothing and footwear up to $25, borrow money to balance the books, increase spending by about 10 percent over two years, and eliminate minimum pricing on bottles of alcohol.

They also will consider whether to maintain certain business taxes that were scheduled to expire, including a 20 percent surcharge on corporate profits and the levy on electricity generators including the Millstone nuclear power complex in Waterford.

As Malloy has laid out his fiscal proposal and public hearings have been completed, legislators are now meeting behind closed doors at the committee level to craft details of the spending plan. The budget-writing appropriations committee will make its recommendations by an April 23 committee deadline, and then the leaders will negotiate the final compromise.

Sen. Rob Kane, the ranking Senate Republican on the budget-writing committee, said it is crucial that top lawmakers concentrate now on the budget.

“It’s pretty scary when you have a $1 billion deficit in the first year and $1.3 billion in the second year and no one is paying attention to it,” Kane said in an interview.

“We’re so far behind. I don’t anticipate us having a budget by June 5,” he said. “Let’s hope this budget process is bipartisan, because the last time it wasn’t, and we had the greatest tax increase in state history and we’re still in a hole. You can’t tax your way to prosperity. We knew that, but they’re learning that. It just doesn’t work.”

House Speaker J. Brendan Sharkey said he hopes the bipartisan spirit of compromise that helped craft the recent gun control legislation can spill over into the budget process. But he noted that three of the top negotiators — Malloy, Senate Republican leader John McKinney, and House Republican leader Lawrence Cafero — are all looking toward the 2014 election.

“I think the dynamic on the budget is always a little bit more difficult and particularly given that we have three candidates for governor involved in those discussions, I imagine that that will have some role in the conversations that go on,” said Sharkey, the House chamber’s highest-ranking Democrat.

Sharkey pointed out that it is still somewhat early in the process because both the budget-writing committee and the tax-writing finance committee must finish their work in the coming weeks before detailed negotiations among the leaders begin on the budget.

One of the most unpopular items in Malloy’s plan is his proposed elimination of the local car tax for all but the most expensive automobiles. While tax cuts are normally popular, Malloy’s proposal has run into controversy because cities and towns would lose millions of dollars in car-tax revenues with no mechanism to replace the funding.

Stamford, Malloy’s hometown, would lose more than $20 million in car taxes. Democratic mayors from New Haven, Bridgeport, Waterbury, and Hartford have all blasted Malloy’s proposal, along with first selectmen in small towns.

Malloy’s budget proposal, which raises state spending by nearly 10 percent over two years, also would retain corporate taxes that had been due to expire. The plan would not increase income tax rates, although it relies on borrowing money to balance the budget and leaves municipalities uncertain how to replace some state funding. The proposal also provides $125 million for pay raises for about 45,000 unionized and non-unionized state employees and offers a tax amnesty program for those who owe back taxes.

For the average taxpayer, the budget would provide a break from the 6.35 percent state sales tax on clothing and footwear, starting next year. That’s an overall savings of $55 million for all taxpayers in the second year of the budget. It would also eliminate the property tax on cars that have an assessed value of less than $28,500.

The overall spending would be $21.5 billion in the first year and $22.3 billion in the second year, which Republicans say is too high. By contrast, a coalition of about 50 groups — known as Better Choices for Connecticut — says taxes are not high enough in various categories. They are calling for an increase in the cigarette tax by 95 cents per pack to $4.35 per pack in order to match the level of neighboring New York State. That hike would generate an estimated $75 million per year. The group is also calling for raising the state income tax rate from the current maximum rate of 6.7 percent to 6.8 percent on any income between $1 million and $2 million and then 8.8 percent on all income above $2 million.

“Connecticut’s budget deficits cannot be solved with spending cuts,” Better Choices for Connecticut said in a statement. “We need revenues, jobs and stable public services, not cuts. By cutting the state’s budget, the financial burden just shifts the costs to local governments and families and costs jobs.”

Former Republican gubernatorial nominee Tom Foley, who says he intends to run again in 2014, said in an interview that Malloy “purposely” elongated the gun negotiation process because he did not want to talk about the state’s budget problems.

“The legislature and the governor need to shift over to talking about the budget,” Foley said. “There needs to be an active and engaged public debate on how we’re going to solve our budget issues here in Connecticut. Governor Malloy would much rather go on MSNBC and talk about gun control than talk about the Connecticut state budget. That’s what’s been happening.”

But Malloy spokesman Andrew Doba said, “I don’t know if he wasn’t paying attention or if he is just trying to ignore reality, but Tom Foley is wrong. The governor put out a budget in February and has been talking about what it would mean for the state. We’ve done four town halls, in which the budget was the primary topic of discussion.”

Like some legislators, Foley blasted Malloy’s car tax proposal.

“It’s shifty,” Foley said. “It’s this three-card monte or shell game. He’s trying to give people a tax break that doesn’t cost him anything. He’s giving a tax break that impacts municipalities. It’s a governor trying to give a handout to citizens that doesn’t hurt his budget, but it hurts our towns. The citizens are smart. They know that if the car tax goes away, the municipalities are going to have to recover it in some other way with property tax or some other revenue source.”

Doba said that Malloy’s plan “was to begin a conversation about how we can provide middle-class tax relief,” and he said the car tax plan accomplishes that goal.

He added: “The car tax is the most regressive, most hated tax in Connecticut. I’m surprised that Tom Foley is defending it. It sounds to me like he is defending the status quo.”

While Kane fears that the budget will not be completed by the end of the regular legislative session, he said, “I hope I’m wrong.”

The gun control compromise, he said, could be a good omen for the legislature to continue working together over the next two months.

“Hopefully, the culture has been changing in the building to become more bipartisan,” Kane said. “Speaker Sharkey is moving in that direction. I give him a lot of credit for that. They realize we have some good ideas. … We needed to tackle that [on guns]. We did. But there’s a real problem that remains. Hopefully, we can see more focused attention on the budget because that’s the big gorilla in the room.”