by Don Pesci
The National Conference of State Legislatures’ report on how well drafters of state budgets read the recession’s economic tea-leaves is now in.
The results are disappointing, according to a report in the New York Times.
“Thirty-one states said estimates about personal income taxes had been overly optimistic, and 25 said that all three major tax categories — sales taxes, personal income taxes and corporate taxes — were not keeping up with projections.
“Three states, for example — Alabama, Colorado and North Dakota — said personal income taxes were coming in higher than expected. But they said they had seen declines in other tax categories, like corporate taxes (down 33 percent in North Dakota), severance taxes from oil and gas (down 51.8 percent in Colorado) or sales tax (down 8.5 percent in Alabama.)
“Hardest hit on the income tax collection front was New York, where revenues were off 48.9 percent compared with the last fiscal year. Corporate income taxes plummeted most in Oregon, down 44 percent, while sales taxes fell most in Washington, down 14.1 percent.”
Connecticut, of course, is contiguous to New York. Gov. Jodi Rell recently cautioned Democrats in Connecticut’s hard-of-hearing legislature against raising corporate taxes – the Democrat controlled legislature wants to raise the state’s corporate tax a whopping 30 percent – because she thought that if her state could resist the temptation endemic in the North East to raise business taxes in order to plug holes in deficits, Connecticut might be well positioned to capture some businesses from New York.
It is also possible that Rell had chuckled over George Will’s line about governor of California Arnold Schwarzenegger, about whom Will wrote that he was “the best governor the states contiguous to California ever had.”
So far, Rell has resisted California’s’s leap into the void, but in the extended session now upon us, Democrats will be romancing Rell to defenestrate herself.
Though the numbers of seats captured in the last election by Democrats suggest otherwise, the party of Chris Dodd, who has half a dozen arrows piercing his Achilles heel, Speaker of the House Chris Donovan, who worked part time as a union organizer for the Congress of Connecticut Community Colleges and is presumed to be much further left on the political spectrum than his predecessor Jim Amann, and President Pro Tem of the Senate Don Williams is not prospering — because Connecticut is not prospering. Indeed, it is the slowdown in business activity that has blown a hole in budgets throughout the North East. Democrats in Connecticut hope to fill that hole with a thirty percent corporate tax increase on businesses that have no more money to surrender to a rapacious government.
You cannot make lemonade from lemons that have been squeezed dry.
The Donovan-Williams attempt to put the squeeze on Connecticut’s hard pressed businesses is likely to be met by the only possible response: Businesses that cannot afford the new imposition will go out of business, throwing their unemployed workers on the mercy of a state deeply in debt, and businesses that can afford to sidestep the pain by moving to greener pastures elsewhere will do so, diminishing the state’s already diminished revenue.
Bloomberg News Recently reported that Steven Ballmer, Chief Executive Officer of Microsoft Corp., the largest software company in the United States, would move some employees offshore if the U.S. Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.
“It makes U.S. jobs more expensive,” Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”
Squeezed businesses, unlike squeezed lemons, have resources. The tendency of any business is to use its own resources to advance its real interests. Businesses that cannot make profits – newspapers lately have fallen into this unfortunate category – go out of business, at which point both employees and stockholders suffer the loss. Given the fact that stockholders and employees are bound together by the same fate, it is both errant nonsense and a false dichotomy to say that in punishing the stockholders we are not similarly punishing the employees.
Gov. Rell gets this. The Donovan-Williams combine does not.