Gov. Malloy’s budget math doesn’t add up

February 8, 2013

Waterbury Republican-American editorial

Well, knock us over with a feather. Did the news media really call out Gov. Dannel P. Malloy for claiming his biennial budget proposal cuts spending by more than $1.8 billion when it actually raises it $1.9 billion?

For once, the media did the math. The 2012-13 budget spends $20.4 billion; in 2013-14, Gov. Malloy proposes $22.3 billion. That may be more than $1.8 billion less than government was supposed to spend. But it’s $1.9 billion more than this year, and it’s billions more than the state can afford.

“Journalists” for once refused to let Gov. Malloy get away with calling an increase a cut, and to their credit, they also questioned the veracity of his assertion that a budget that boosts outlays by 9.7 percent constitutes “living within our means.” Many wondered, too, how the governor could propose hundreds of millions in debt with borrowed money, likening it to paying the mortgage with a credit card.

We’re not yet convinced the hounds of the Fourth Estate have climbed off Gov. Malloy’s lap to resume their role as government watchdogs. If they have, they will point out his inconsistencies on taxes.

“My proposed budget does not include any new taxes,” the governor said Wednesday in his budget address to the legislature. “The families and the businesses of Connecticut have enough on their shoulders. This budget asks no more of them.”

His Clintonian claim about “any new taxes” is debatable since he proposes to extend tax increases that are set to expire. But the rest is balderdash. Gov. Malloy’s budget demands $917 million more in income taxes, $328 million more in sales taxes and $35 million more in corporate taxes, which like other business taxes ultimately are paid by families and individuals through higher prices on goods and services. “This budget asks no more of them,” except it asks $1.8 billion more, which makes the difference between his tax and spending increases little more than a rounding error.

The stock answer from government types for this is since taxes are based on percentages, receipts rise when wages, sales and profits go up. In the government’s lexicon, however, it’s not a tax increase when people’s taxes go up. It’s only an increase when government raises rates. But that doesn’t make this tax increase any less financially and economically crippling.

Semantics aside, are we the only ones who think Gov. Malloy’s tax-revenue increases — 10.7 percent on incomes and 8.4 percent on sales — a tad optimistic? This is the sort of growth one might expect in good economic times, a la 2004-07, when the state unemployment rate was about half what it is now, the welfare plantation was less populated and cost $2 billion — 50 percent — less, and income-tax receipts were about $5.5 billion vs. $8.5 billion this year, and according to Gov. Malloy’s budget, $9.4 billion by 2014.

Granted, budgets are only guesstimates, but these revenue projections are meaningful only because they plant the seeds for next winter’s “revenue shortfall” and future tax increases, to be blamed not on chronic, calculated overestimation of tax receipts and underestimation of expenses, but on the usual suspects not named Dannel P. Malloy.