Fuzzy Math

Hartford, Conn. – Question 1: Connecticut needs $8.8 billion to balance its budget. Should the state A) raise taxes or B) cut spending? Democrats, who control two-thirds of the legislature, say the answer is both of the above. But Governor Jodi Rell, a Republican, says raising taxes is the wrong choice. On prudence, Rell scores high: Raising taxes will slow the recovery, so the state should cut spending instead.

“We need to conserve the services that are absolutely necessary to our economy,” said State Senator Mary Ann Handley, a Democrat. But which services are “necessary”? Though Democrats sliced $2 billion from the budget, they saved items that were less than essential, like $12 million for the Commission on Human Rights and Opportunities and $1 million for the Latino and Puerto Rican Affairs Commission. When the state is losing money, it should keep the agencies that provide services, not the commissions that provide forums.

State Representative Ryan Barry, a Democrat, defends the commissions: “They are advocating for people who can’t afford lobbyists.” True, but the state is cutting services at the same time that it is paying commissioners up to $150,000 per year. For example, Rell wants to cut $1.4 million in subsidies for a LIFE STAR helicopter at Hartford Hospital. She could pay for this item with money saved by closing commissions. Then, Democrats could say they cut the fat before reaching into taxpayers’ pockets. Besides, most people would take a helicopter over a lobbyist.

Instead of taking this route, Democrats plan to raise the income tax from a flat 5 percent to 6 percent for couples making $500,000 per year, 6.5 percent for couples making $600,000 per year, and 7.5 percent for couples making $750,000 per year. Businesses would bear a temporary 25 percent surcharge. Democrats think these hikes are fair. A couple making $600,000 per year would pay only $1000 more in income taxes.

Republicans, however, fear the rich will skedaddle. “The wealthy can move their tax home easily,” said State Representative Pam Sawyer, a Republican. Democrats are skeptical. “No one is going to move out of the state because we have an income tax of 6.5 percent. New Jersey is almost 9 percent or more. Massachusetts has a capital gains tax; we got rid of that,” said Barry. He has a point. Few people will move from Connecticut because of these changes.

But few people will move to Connecticut because of them, either. “Companies in New York have told us they are considering moving to Connecticut for lower taxes. We need to keep the state competitive,” said Sawyer. And there’s no guarantee the surcharge will be temporary. For the next two years, federal stimulus money will fund 17 percent of the deficit. Extra credit: What happens when that money disappears?

“Starting in 2012, we have another $4 billion deficit,” warned State Senator Dan Debicella, a Republican. Any estimate of the deficit's size, however, depends on your expectations. “We are operating on the assumption that in a couple of years the economy will come back,” Handley admited. In that case, legislators will be able to lower taxes. This assumption is reasonable, but risky. Higher taxes will scare businesses from Connecticut, slowing the recovery. And when the economy rebounds, stuffed coffers will tempt legislators to spend even more.

The state should cut spending and keep taxes low. Does government spend to serve or serve to spend? On this question, too many legislators leave their answers blank.


Brian J. Bolduc ’10, a Crimson editorial writer, is an economics concentrator in Winthrop House.