Taxes: Privilege or Plunder?

This week Capitol DisPatch looks at a pair of issues: Connecticut’s tax burden and more views on the upcoming special session on jobs.

TAX BURDEN

“Taxes, after all, are dues that we pay for the privileges of membership in an organized society,” said President Franklin D. Roosevelt.

“What at first was plunder assumed the softer name of revenue,” said Thomas Paine.

Whether privilege or plunder, taxes are again on state legislators minds. That’s no surprise since election season arrived and also since the General Assembly will soon meet for a special session on jobs. And it’s also because Bloomberg just rated Connecticut as No. 1 in the nation when it comes to its tax burden.

According to Bloomberg, the state ranks No. 1 in tax burden because of its 5 percent income tax, its 6.35 percent sales tax, its $2,381 property tax per capita and because of the between a 7.2 percent to 16 percent inheritance tax with $2 million exemption.

State Sen. Kevin Kelley, a Republican representing towns in the 21st Senate District including Stratford, Monroe and Shelton, said Bloomberg’s report had no surprises.

“You have a governor who passed the largest tax increase in the state’s history,” Kelley said. “But when you bring it back home to the district what you find are more families who are struggling.”

And the struggle hits Democrats and Republicans alike, Kelley noted.

“Obviously there is a disconnect. I’m not going back to Greenwich or to Darien. I have a middle class constituency and they’re screaming ‘Uncle,’” Kelley said. “And what did the state do for them? They asked for more money. They gave them a larger tax bill.”

In addition to the increase sales tax, from 6 percent to 6.35 percent, there was a further 3 percentage-point levy on luxury goods such as expensive cars and boats. The state also collects the third-highest property taxes per capita and is one of 14 states to tax Social Security income, according to the report.

“We all expect to pay taxes, but we don’t want to see our taxes wasted,” said state Rep. Terrie Wood, a Republican representing Darien and Norwalk in the 141st House District.

Some legislators said the high standard of living in Connecticut comes with higher incomes, and thus higher taxes. 

“Despite Bloomberg saying that Connecticut has the highest tax burden in the nation, Ernst & Young released a report in July showing that Connecticut businesses faced the lowest tax burden in the entire country,” said state Rep. James Albis, a Democrat representing East Haven in the 99th House District.

Albis called the recently passed tax increases unfortunate but necessary to get Connecticut back on track and better positioned for the future.

Of all the taxes levied on residents it's the property taxes that are the most troubling, Albis said.

“They are the most regressive,” he said. “That means that folks with a lower income end up paying a much higher percentage of their income in property taxes than folks with a higher income. For example, think about a town like Greenwich. Since property values are higher, the town rakes in more per home, and can afford to have a low mill rate. However, when you look at a city like Bridgeport or Hartford, property values are generally much lower.”

Albis said these cities must make up the difference and so are forced to have a higher mill rate, “squeezing more money out of those who can less afford it.

"Some relief would be possible if property taxes were collected on a more regional basis, rather than town-by-town," Albis said. "This would take some of the burden off those who are struggling.”

According to Connecticut Voices for Children, the other issue facing the state is the concentration of income and the continuing high unemployment rate.

Statewide unemployment was 9.1 percent 2010, up from 4.9 percent in 1990, according to the U.S. Bureau of Labor Statistics. In addition, Connecticut’s median household income, inflation adjusted, was $64,031 in 2010, down from $69,606 in 1990. 

EXTREME MAKEOVER?

In less than 10 days the General Assembly will meet for a special session on jobs.

“The jobs session is purely cosmetic,” Wood said. “And it’s ironic that it’s just before the elections.”

Gov. Dannel P. Malloy’s office took issue since the session hasn’t begun and a final package has yet to be presented.

“Her leaders are working to try to make this bipartisan and as helpful as possible to businesses; and raising concerns about a date that was chosen in consultation with every legislative leader, including her own,” Malloy's spokesman Colleen Flanagan wrote in an email.

Moreover, Flanagan said the governor is focused on generating job growth. 

“The recent announcement that Jackson Laboratories will be a making a billion dollar investment in Connecticut is proof that the Governor’s focus is producing results,” Flanagan said. “As we head into the jobs special session, the Governor has been very clear that he wants it to be bipartisan, and he and legislative leaders are working to make that happen.”

Kelley said he’s skeptical anything substantive will be achieved.

“With regard to the job session, I’d like to think things are going to be different, but we still have the same governor and the same Democrat majority,” Kelley said.