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Senator Boucher: ‘Higher income taxes will only dig the hole deeper’

Report by Paula Antolini
April 26, 9:40PM EDT

 

Senator Boucher: ‘Higher income taxes will only dig the hole deeper’

Under this administration, the Connecticut income tax was raised in 2011 and again in 2015. We were told this was necessary to eliminate the cycle of budget deficit after budget deficit and put the state’s fiscal house in order.

Yet, here we are again in 2017 facing more budget deficits. We also have reports from the legislature’s nonpartisan Office of Fiscal Analysis (OFA) that state income tax collections are $267 million below projections.

A recent article in CT Mirror said the OFA report contained a “rare commentary” suggesting that the state has fallen into a self-perpetuating cycle of lower state revenues leading to lower individual spending and lower investing in the state. This leads to even lower state revenues and lower individual spending continuing downward pressure on the state’s economy.

The same nonpartisan analysists previously predicted a two-year budget deficit of $3 billion, which could now be almost $4.5 billion.

The erosion in income tax receipts threatens both future budgets and the budget that ends June 30, 2017. This year’s shortfall exceeds the reserves in the state’s rainy day fund and, according to the state Comptroller, would be added to an already predicted $44 million to $45 million deficit.

Rather than recognize the overall impact raising taxes has had on the state’s economy and tax collections, Democrats again are proposing new tax increases in an attempt to fill the budget deficit sinkhole that threatens to swallow the state. One of the most inflammatory proposals is subjecting nonprofits to the state sales tax.

Nonprofits are the organizations who shoulder the burden of providing vital services to the sick, the disabled, the homeless – the most vulnerable in our society. They do this at half the cost of what government would spend, because serving the needs of individuals is their only purpose.

Charity for charity’s sake has always been recognized as a higher calling, and as such, government has deemed the activities of nonprofits as non-taxable. As a result, these organizations hire and conduct their work based on this financial rule. Government has benefitted greatly from the work nonprofits perform that might otherwise fall on a state agency.

Now the legislature and municipalities propose pulling the financial rug out from under nonprofits and risking their viability. If charitable organizations no longer provide social services, what happens to those that need them? Does this mean municipalities will have to absorb those costs and use up the extra tax revenues they are now seeking to collect?

At the Finance, Revenue & Bonding Committee public hearing, Republican House Leader Themis Klarides noted that 50 percent of the state’s budget is fixed costs that Democrat leaders say cannot be touched. However, they are ready to do the unthinkable and tax nonprofits.

As state government taxes residents and businesses on everything at every level, they are experiencing death by a thousand cuts: at least the ones that stay are. The US Census Bureau reports that Connecticut is one of only eight states to experience a population decline and in 2016, the state lost 200 net jobs over a 12-month period. GE is not the only business leaving Connecticut for more business-friendly climates.

It’s time to take a different approach to the state budget. Instead of exhausting every possible revenue option, it’s time to live within our means. Otherwise, the cycle of budget deficit after budget deficit, and lower revenues leading to lower investment leading to lower revenues – this cycle will continue to push our economy down while it also pushes people and businesses out.

Let’s change the cycle and stop digging before we hit rock bottom.

 

Senator Toni Boucher (R-26) represents the communities of Bethel, New Canaan, Redding, Ridgefield, Weston, Westport, and Wilton.

 

 

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