We Can’t Tax, Spend Our Way to Prosperity

You can’t tax and spend your way to prosperity. It’s a lesson that competitor states have heeded and Connecticut must also.

Just a few months ago at the start of the 2015 legislative session, policymakers seemed to be rallying around the need to make Connecticut more competitive—to build on our enormous potential for jobs, investments, opportunities.

Eyes were opening to the possibility of making state government more effective, efficient and affordable for state taxpayers—looking to the future first by being better stewards of limited resources today.

Now lawmakers are considering grim fiscal choices that won’t make Connecticut more competitive but essentially would cannibalize our economy with tax increases that would impact every job creator, employee, and community in the state.

How did we go from seeing opportunities to seizing more tax dollars?

Even as the legislature has struggled with the state’s fiscal problems, reminders from the outside continue to pour in that Connecticut has much work to do to stand tall in national economic competitiveness rankings.

Just weeks ago Connecticut placed 46^th in the 2015 Aerospace Manufacturing Attractiveness Rankings, conducted by PWC.

For a state that’s home to some of the world’s most important aerospace companies, that’s discouraging.

Next, Chief Executive Magazine ranked Connecticut 45^th in its Best and Worst States for Business rankings—a drop of one place in a year.

Then, Wallethub ranked Connecticut 47^th in the U.S. for our state and local tax burden.

Enormous potential

Speaking at a forum about state taxes this week, CBIA President and CEO Joe Brennan said that while rankings are discouraging, “Connecticut has enormous potential. We have to leverage our strengths–our workforce, our quality of life, our world-class companies, the great location… “ to fulfill the state’s potential.

“We should be a destination state for businesses,” said Brennan, “but we’re not. We need to change that. These tax increases will put the brakes on any economic recovery.”

Talk this week centered on opposition to the $2.5 billion in various tax increases voted out of the Finance Committee—with much of the burden falling on Connecticut employers but ultimately impacting nearly everyone in the state.

But three of Connecticut’s toughest competitor states passed sales taxes on services as broad as the one proposed by the legislature’s Finance Committee and all three states couldn’t wait to abandon the idea—months, weeks, and in one case, hours later.

What did Florida (six months), Massachusetts (two months) and Michigan (17 hours) lawmakers know that Connecticut legislators should heed?

Michigan also just overwhelmingly rejected another sales tax increase that supposedly was to pay for highway infrastructure improvements.

Voters in Michigan suspected that their tax dollars would somehow find their way to other government troughs and, by an 80%-20% landslide, said “No.”

Gov. Malloy, speaking at a Policy Pairings forum sponsored by the Connecticut Mirror and the CT20x17 campaign this week, said the “depth and size of the reach on the tax side [the Finance Committee’s proposal] … is far more dangerous for some business interests than anything I’ve talked about doing.”

The governor predicted that “we’re going to come out [of the budget negotiations] better than it appears right now.”

He added that there is “no chance” that the tax hikes proposed by the Finance Committee will be passed.

However, the governor’s earlier budget proposal increased taxes by nearly $1 billion, with about half of that on Connecticut’s job creators. His budget also weakened key tenets of state tax policy that have helped grow several of the state’s core, job-growing industries.

The Finance Committee’s tax package was developed to support the Appropriations Committee’s two-year, $40 billion budget that increases spending by $1.5 billion and blows past the state’s constitutional spending cap.

There are better solutions than massive tax and spending increases.   

Sustainable spending reforms and practices can help state government become more nimble, more efficient, and more affordable.

Several recommendations of the Connecticut Institute for the 21^st Century, along with best practices of other states, could help address huge areas of state costs for corrections, long-term healthcare, social services, state pensions, and information technology.

CBIA will continue to lobby for adoption of sustainable spending reforms.

The next state budget remains in constant focus at the Capitol as the 2015 legislative session heads into the final three weeks before adjournment at midnight on Wednesday, June 3. 

For more information on the budget and state spending, contact CBIA’s Louise DiCocco at louise.dicocco@cbia.com or 860.244.1169.

For more information about state taxes, contact CBIA’s Bonnie Stewart at 860.244.1925 | bonnie.stewart@cbia.com | @CBIAbonnie