Democrats: If It Moves, Tax It

With a structural crisis still weighing down the nation’s economy and the State’s balance sheet getting worse by the day, Legislative Democrats took the opportunity today to show just how far out of touch they are with reality. 

Sens. Eileen Daily and Toni Harp with Reps. Cameron Staples and John Geragosian, announced a budget proposal that treats the economic recession like a pair of pants that will be out of style by Labor Day.  Their proposals –  income tax hikes retroactive to January 1st for taxpayers making above $250k, a 30 percent tax hike on businesses, $400 million in borrowing, and the imposition of a version of the Internet Sales Tax – make it clear that they seek to hunt down and kill anyone or anything that generates economic activity in Connecticut.

If there was a lesson to be learned from the most recent economic crisis, it is that state government is too dependent on income tax revenue.  We can choose to fight out the same old battles about who pays what in income taxes, but whatever the mix, it still doesn’t address the fact that the revenue stream is very unreliable – particularly in a state sensitive to the stock market’s fluctuations.

The Democratic proposal, though, basically doubles down on the old thinking.  In 2006 (the last year for which data is available from DRS), the state received 46 percent of income tax revenues from households with adjusted gross income of $250k or more.  The Democratic proposal would change that to 56 percent – making the state coffers more dependent on AIG-style bonuses and Madoff windfalls for revenue.

recessiongraph

State Rep. Staples defended the 30 percent “surcharge” on business taxes by recalling that “it’s what we did in 2002-2003 when times were tough”.  Take a look at 2002-2003 on the graph above.  Now look at the current situation.  This is the problem with that line of reasoning – they seem to believe that everything will be fine in a few months.

The economy isn’t just in a cyclical downturn, as does happen in normal business cycles.  The economy has real structural issues, spurred by the subprime mortgage meltdown and Senator Dodd’s benefactors – Lehman Brothers, AIG, Countrywide Financial, and Fannie Mae & Freddie Mac.

It is true that the Democrats have already manufactured their own “recovery” of sorts.  Economists are already forecasting that the Obama Stimulus plan is likely worth 1% – 3% of GDP growth for 2009, just because of its enormous size and the multiplier effect.  But regardless of the placebo effect, applying a  band-aid doesn’t change the fundamentals of the wound beneath it.

It is going to take some active efforts on the part of state government to start seeing real growth in economy again – and that requires promoting business activity, not killing it with taxation every time it creates income, turns a profit, or makes a sale.  The Democratic proposal does none of the former, and a whole bunch of the latter.

Source for Chart – Page 1, Appropriations & Finance Committees Update, April 2, 2009, as distributed at 4/2/09 press conference

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25 responses to “Democrats: If It Moves, Tax It

  1. scanman1722

    Republicans: If you don’t like reality, lie about the numbers and/or propose an unrealistic budget knowing the Democrats will make the hard, unpopular choices because they know the importance of leadership in these tough times.

  2. Republicans: If you don’t like reality, lie about the numbers and/or propose an unrealistic budget knowing the Democrats will make the hard, unpopular choices because they know the importance of leadership in these tough times.

    Mua ha ha ha ha!

    Oh I do love it when Democrats award themselves the Profiles in Courage Award when they raise taxes.

    It is the least difficult choice to make. It means they don’t have to pick and choose between what gets cut and what stays. Nothing is easier.

    And you ought to be ashamed of using the words “Democrat” and “leadership” in the same sentence after this display today, my friend.

  3. scanman1722

    It is the least difficult choice to make. It means they don’t have to pick and choose between what gets cut and what stays. Nothing is easier.

    From CTNewsJunkie:

    “The budget pie chart presented by the Democrats Thursday said 27 percent of their budget is spending reductions, 37 percent tax increases, 17 percent federal stimulus dollars, and 19 percent from the rainy day fund.”

    27% of spending cuts. It looks like they had to decide “what gets cut and what stays after all.”

    I apologize for nominating the Dems for the Profile in Courage award. We all know that belongs to the governor who, you know, lied to the Connecticut people about the true deficit as a means of masking the need to raise taxes.

  4. Someone please tell me where in the State Constitution or US Constitution where politicians have the power to tax retroactivley back to Jan. 1?

    Are you telling me that if you settled the estate of a deceased relative in the last three months in our great probate court system here in CT, that these Democrat Bozos are proposing that you will now owe more?

  5. nah, they are changing the whole probate system and we’ll make money on these things.
    Sure.

    where are the heavy costs pulling the probate system coming from?
    I’ve heard rural and then larger cities?
    Is there data collected somewhere?

  6. “I apologize for nominating the Dems for the Profile in Courage award. We all know that belongs to the governor who, you know, lied to the Connecticut people about the true deficit as a means of masking the need to raise taxes. ”

    A) I am not a fan of Rell.
    B) The Office of Fiscal Analysis released the new worse revenue numbers two days before the Governor HAD to give her budget address. Would you like to be in charge of preparing an entire states budget for the next 2 years in 48 hours? She was working on the newest numbers that were available to anyone for the months it took to put together.
    C) Thats the job of the legislature, to work with the new information and adapt it to the Governor’s budget until there is consensus.
    D) Taxing is absolutely the easiest way out because you just shift the burden to others and avoid the blame for the bloated government that you made during the good times, instead of saving that money. If you watched the budget presentation today, some of the “spending cuts” are ballpark savings ESTIMATES for new policies that they have no idea if they will really work or not. And not to mention there are items that they are just bumping down the line to pay for in 2012 because they didnt feel like paying for them now.

    This was a complete failure on both ends and of course we will suffer for it. All you partisan hacks on this board and the legislature are the problem.

  7. B) The Office of Fiscal Analysis released the new worse revenue numbers two days before the Governor HAD to give her budget address. Would you like to be in charge of preparing an entire states budget for the next 2 years in 48 hours? She was working on the newest numbers that were available to anyone for the months it took to put together.

    Her own budget director, in the Governor’s presence, said the deficit was $8 billion weeks before they released the budget, and two days before the budget was released, the Governor herself said that her budget would address an $8 billion deficit.

  8. Oh, and, now, months later, the Governor still refuses to acknowledge a deficit larger than $7.4 billion – in other words, the OFA numbers she didn’t have time to deal with? Well, she apparently still hasn’t had enough time to absorb them.

  9. Oh, and, now, months later, the Governor still refuses to acknowledge a deficit larger than $7.4 billion – in other words, the OFA numbers she didn’t have time to deal with? Well, she apparently still hasn’t had enough time to absorb them.

    Gabe, when does it end? When do we stop raising taxes? When? How many jobs do we have to lose before you, and the rest of the Democrats, realize that this is a recipe for disaster?

  10. scanman1722

    Jack-

    I love how you and the rest of the conservatives on here love to think we Democrats get a boner over raising taxes. I don’t know anyone who actually likes taxes, let alone any politician in their right mind that likes to levy them. The Dems were forced to do this because of the conditions we live in and because Rell and the Republicans live in a fantasyland in which they refuse to even consider increased taxation as a remedy nomatter how logical it is when you are facing a deficit such as the one we find ourselves (notice how I said ourselves meaning the entire state) in. We need to right the ship and if that means raising taxes on a certain segment of the population to do it well then so be it. We don’t have to like it but, unlike the Republicans, we know what needs to be done.

  11. Gabe, when does it end? When do we stop raising taxes? When? How many jobs do we have to lose before you, and the rest of the Democrats, realize that this is a recipe for disaster?

    Now that you said that, I guess the Governor’s budget did cover the entire $8 billion deficit that she said it would, and not just $6 billion of it!

  12. I don’t know anyone who actually likes taxes, let alone any politician in their right mind that likes to levy them.

    What a load.

    Dems not only like taxes, but even when they don’t work do nothing to correct the situation.

    Witness the Diesel fuel tax where the last hike resulted in a decrease in net revenue; or cigarettes where CT now suffers a 30+% bootleg factor. I guess since that’s lower than NYC’s whopping 70% we should leave ours alone right?

    Let’s see a Dem come out and admit any of it.

    We won’t because the party as corrupt and disgusting as Dodd himself.

  13. AndersonScooper

    On Hannity, (yuck, I need a shower), Rob Simmons went where Sam Caliguiri would not, calling Dodd “a lying weasel”.

  14. We have to be honest about this situation. To me, the most frightening stat I’ve seen is the growth of the state budget from the implementation of the income tax in 91/92 until now. I think it was like 6 or 7 billion then, it later grew to 10 or 12 billion in 2000, now we’re up to 18 billion. This is unsustainable and is moving at a much faster rate than inflation. Dems need to recognize this and it needs to either stop or major reform needs to take place. Enormous reform in the way the state gov’t is structured. I have to imagine that more streamlining is possible whether it be in the form of cuts or consolidations. This current path we’re on is unsustainable and will catch up with us in 10-20 years when all CT has left is 4 billionaires and 400 million either unemployed or fast food workers. The middle isn’t necessarily getting killed because it’s leaving before that’s even a possibility. It’s voluntarily leaving when all the brilliant kids we spend money educating skip town the first chance they get.

    That being said, I find it a bit disingenuous that the Republicans at every level of gov’t have ceded real meat and potatoes public policy proposals in favor of hokey AM radio talking points. At the Federal level they offered nothing of substance and at the state level they offered nothing period. The party of ideas has unfortunately become the party of Joe the Plumber, Glenn Beck and Sarah Palin. AM radio killed the wonks that could save that party.

    I don’t think we’re in an “either or” situation with regards to taxes and cuts. No matter what,.. to properly address this crisis it is going to have to be a mix of cuts and taxes whether that ration is 50/50 or 90/10 or 10/90. How that balance of proposals works out is a good debate to have as long as both sides remain intellectually honest and try to work together to help the largest amount of people while charting a course based on stability and long term planning.

  15. or cigarettes where CT now suffers a 30+% bootleg factor. I guess since that’s lower than NYC’s whopping 70% we should leave ours alone right?

    ACR, I was surprised to see Sam Caligiuri sponsoring a bill to ban smoking at retail service stations — is there some reason why this would be a necessary law?

  16. ACR, I was surprised to see Sam Caligiuri sponsoring a bill to ban smoking at retail service stations — is there some reason why this would be a necessary law?

    Seems like common sense to me, but if anyone thinks they’re going to get mechanics to quit smoking en mass, they’re crazy.

    On Hannity, (yuck, I need a shower)

    Interesting POV.

    Seriously in early 2006 I noticed my mom would have MS/NBC on occasionally.
    That struck me as odd.
    When I found her watching Keith Ioughtbeeuthenized later the same year I knew she was going.
    Sure enough she was gone in less than a year.

  17. Now that you said that, I guess the Governor’s budget did cover the entire $8 billion deficit that she said it would, and not just $6 billion of it!

    You didn’t come anywhere close to answering the question.

    When does it end? When do we stop raising taxes? You may think that the Democrats’ tax hikes will bridge the gap, but they will not. Once again, Democrats look to raise taxes on the greatest revenue generators in the Connecticut economy, who also happen to be the most mobile. As ACR mentioned with regard to the diesel fuel tax, these increases will not bring in anything like their intended returns (and may, in fact, produce negative results), and will only cause job-creating businesses, and wealthy people, to look elsewhere.

    What right-minded entrepreneurs will open up a business here, under these conditions? Why would Travelers, or Xerox, or UTC expand their operations here, under this regime? The institution of the income tax itself stifled any sort of job growth that we once had; since 1991, we’ve been dying a slow and painful death. Now you’re simply pouring gasoline on the fire.

    A vote for this budget is a vote against job growth, plain and simple. Congratulations, Democrats. Michigan is our future.

  18. If we all just became State Workers, then the problem is solved.
    What is the Budget Deficit actually composed of?
    Most of it is Pension Liability and other Benefits.
    Tiem to Phase out Taxpayer funded Pensions. I find this blatantly unfair to raise the taxes of everyone so that a handful of State Residents get to keep there perks.

  19. You didn’t come anywhere close to answering the question.

    I didn’t try. You see, I was talking about something else (the Governor’s inability to put out a budget that filled the deficit and her willingness to lie about it) and refused to be knocked off topic.

  20. The Dems claim that they modeled their plan after actions instituted in past recessions. May I point out that Connecticut has generally lagged the country in recovering from these past recessions, and emerged from each with less jobs, a lower (but older) population, and generally weaker economically?
    Following past practices without studying the consequences is legislative malpractice at its worst. To paraphase: if the Dems are going to choose to ignore history, we are deemed to repeat it.

  21. Joe Sixpack

    27% of spending cuts. It looks like they had to decide “what gets cut and what stays after all.”

    Cuts like “Sen. Slossberg’s paln to reinvent government will save $50 million- ” What’s her plan? Don’t know yet, but I’m sure it will be a doozy.

    Cuts like “union concessions will bve $300 million”. What are those concessions? Don’t know yet. But we know we can’t lay anyone off, since “job security” is a contingency of the concessions they give.

    So it will be cuts like the ones they identified in their last deficit mitigation bill – you know, where they “found” some funds that no one knew existed – like the citizens election fund – and said they would cut $220 million from those . Then they didn’t cut a dime, said the Governor wasn’t being helpful to them in locating the money to cut.

    And in that same deficit mitigation bill where they claimed savings from an early retirement package – one they didn’t authorize to be actually used. And since the fiscal year is nearly over, and they still haven’t come up with the ERIP program, my guess is that was a BS “cut” all along.

    So sure, thanks for the wonderful leadership, superduper majority D’s. “Real” cuts we can all sink our teeth into. Honesty and transparency in this budget indeed – it’s pretty transparent that this is a load of crap.

  22. If we all just became State Workers, then the problem is solved.

    Ya – That’s the plan, Komrad – we will become known as:
    The New England Workers Paradise

  23. The Dems claim that they modeled their plan after actions instituted in past recessions. May I point out that Connecticut has generally lagged the country in recovering from these past recessions, and emerged from each with less jobs, a lower (but older) population, and generally weaker economically?Following past practices without studying the consequences is legislative malpractice at its worst. To paraphase: if the Dems are going to choose to ignore history, we are deemed to repeat it.

    That should be “doomed to repeat it,” and credit is due the historian George Santayana.

  24. for reals,
    your post #15, I agree with most of your thinking.

    “We have to be honest about this situation. To me, the most frightening stat I’ve seen is the growth of the state budget from the implementation of the income tax in 91/92 until now…..The middle isn’t necessarily getting killed because it’s leaving before that’s even a possibility. It’s voluntarily leaving when all the brilliant kids we spend money educating skip town the first chance they get.”

    You hit the nail on the head…….. This out of control government growth as well as the exodus of the very people who the bill for this irresponsiblity is really being passed on to is totally unsustainable.

    While I hate increasing taxes as much as anyone here I also understand doing so must be part of the solution. I think the problem most Republicans have with going along with increasing some taxes is the very problem you point out. The faster you allow the irresponsible Democrats to bankrupt us all by further funding their irresponsible wasteful spending, the faster they will happily waste the money and further grow the budget.

    Frankly at this point I am just appalled at the irresponsibility being shown here by both sides, but especially Donovan and Williams. I hope that Rell has the guts to tell them if they are serious here, and this is their real budget proposal, it’s DOA, period. If they then want to shove this crap down the throats of all of us here in the state then override her veto.

    Certainly the mess unveiled here by the Democrats is not even a starting point for any reasonable discussion. How can any non partisan thinker expect Republican’s to go along with painful tax increases (even if we all know some are going to be needed) at a time no one can afford them, just to allow the Democrats (I’ll even go farther, and include some Republicans in the GA as well) to avoid any painful spending cuts?

    To me right now Rell’s veto is the best chance to get both sides talking as adults. Donovan and Williams have the ability to pass what they want without her approval. I suggest she explains clearly to these two 16 year old play ground bullies that she has no intention to negotiate with them from this point. Then it’s their budget as well as every Democrat who votes to override her veto. I say make sure the taxpayers of this state know and understand that. If the Democrats in the GA think this budget is good for this state then override her veto.

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