April 29, 2017

Op-Ed: We Have a State Budget

State Representative Phil Miller

State Representative Phil Miller

It was a spring legislative session full of posturing. Some are still insisting the sky is falling. The media found legislative and executive ideas and personalities fascinating. The legislative process features ever changing ideas, and people find this maddening.

Local property taxes have long been acknowledged as the most burdensome, yet little reform has come. Other states fund public education more through taxes based on income. When I came to the legislature in 2011, we had to fix a 3.5 billion dollar deficit. It came from substantial cuts, state employee concessions, and raising new taxes. This further burdened middle class taxpayers. When I ran for re-election last year, I campaigned on opposing new regressive taxes, making the case that our middle class is doing their share and disproportionately bearing the brunt of relieving higher earners and corporations of some tax obligations in recent times.

The Governor submitted his budget in early February. He was trying to keep his election year pledge not to raise taxes. Because more than half our budget is contractual, his two year budget had almost two billion dollars in cuts in other areas, such as education, higher education, human services, and other efforts.

When the proposed cuts became understood, I was receiving nearly five hundred correspondences a week from citizens of Haddam, Chester, Deep River and Essex. People were alarmed at pending cuts to programs and efforts in early childhood, cultural arts, conservation, including closing our fish hatcheries, and also hospitals, libraries, mental health, serving intellectual and developmental disabilities, municipal aid, tourism, veterans services, U Conn and our state and community colleges, and even our public health districts, youth service bureaus and prevention councils.

Many told me that they felt that the state should properly be the backer and partner in these efforts, that cuts would mean closed doors and less access, lowering our standards and making things worse and costlier to deal with. The other challenge beyond the property tax was deferred maintenance of our infrastructure. Our business community has long been demanding repairs and upgrades to roads, bridges and rails to better move our people, goods and services. The 2011 budget had started this necessary investment, and there has been a consensus that transportation is a worthy investment.

For a long time, people have suggested that our state is unfriendly to business, that we tax too prohibitively, and that we overregulate. Recent studies show that the total state and local tax burden on business in Connecticut, as a share of private sector gross state product, 3.4%, is the second lowest of all states. To be fair, this really attests mostly to our state’s very high productivity. Other studies put us in the broad middle. We will likely never be in the top fifteen, as are states like Florida, which are “right to work” states. This means that employees don’t have to join unions, that employers don’t have to pay a living wage. This is an issue for us, too, where large retail and fast food corporations, like Walmart, pay such low wages that most of the workers receive some kind of public assistance, because they don’t earn enough.

Making it equitable

The budget passed in early June, and there were several issues that still needed to be corrected in the subsequent implementing legislation. Increases in the data processing tax were rolled back to the current one percent, and it stopped a controversial reduction in Medicaid reimbursement. Proposed hospital taxes were reduced by thirty million. It restored cuts to the research and development tax credits.

It closes corporate loopholes in 2016 that have allowed some corporations to hide their profits elsewhere, and it reduces the ability of corporations to carry forward losses to offset future profits to avoid paying taxes. The corporate income tax is only 7.5% of the total business tax burden in Connecticut. The national average is 7.9%. Last year, even the Governor’s opponent, a successful investment banker, had called for ending corporate giveaways.

Our state workforce is 3.3% smaller than four years ago, as positions have been consolidated and streamlined. The new budgets cuts nearly a quarter billion in available overtime and other employee appropriations.

Additional state aid goes to each and every town and city. These state funds, based on income, will substitute for some local property tax generated municipal income. This is a small and hopeful beginning for property tax relief, a long sought goal.

Military veterans’ retirement pay will now be exempt from state income tax.

Who pays more?

Besides the corporations who have been hiding profits elsewhere, there is a small increase in income tax rates for couples making over $500K per year and $1 M per year. This affects about two percent of our population. Our top income rates are still less than New York and New Jersey.

There are those who feel, on principle, that any budget that raises any taxes is unacceptable. I don’t know anyone in local, state or federal public services who takes pride in raising taxes. Our Senator Linares voted against this budget on principle. I voted for this budget because for me, knowing what compromised services would mean, it would have been irresponsible to vote no and not contribute.

There is one more aspect of this budget that will need to be fixed. To guard against weak revenues, there exists a hedge possibility in year two of lowering the property tax credit from $300 to $200. This has rightfully allowed critics to point that this budget really does hurt the middle class to a small degree. I will work next year to maintain the property tax credit at $300.

Editor’s Note: Representative Philip Miller (D-36) represents Chester, Deep River, Essex, and Haddam in the General Assembly. He is the House Chairman of the Planning and Development Committee.

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