More of The Same: Recession Equals Tax Increase Proposals

In February, the Governor drew her line in the sand when she proposed her budget, and the legislature drew its line on April 2, unfortunately that line was drawn off a cliff.Last week, the Finance Committee approved the single largest tax increase in Connecticut history, a two year package totaling over $3.3 billion in new taxes. It seems that the legislature’s inaction to consolidate government for the last six months have made this proposal inevitable, but certainly unacceptable. Residents should not stand for any of these increases, and I believe that the budget process is far from over.

I vehemently opposed this tax package in committee for many reasons. I believe it lets the Appropriations Committee off the hook. That committee failed to consolidate a single agency and their budget proposal is put together with band-aids and chewing gum. After about ten minutes of questioning, the Committee Chairs admitted that over $365 million in “cuts” may not actually be achievable. It is difficult to believe that the Committee would budget millions in unspecified future savings and lapses. The spending package does nothing to address the redundancies or inefficiencies in government. In these extraordinary times, it is just more of the same.

While many people won’t see a direct increase to their personal income tax unless they make $250,000 or more, everyone who owns property will see a tax increase due to the proposed elimination of the real property tax credit. The package also increases the estate tax by 30% and corporate taxes by 30%. Under the bill, the state will even tax you for any services that you use to prepare you taxes! The proposal seeks to eliminate over fifty sales tax exemptions. Businesses will see a 15% reduction to tax credits that are typically credited for job creation and economic growth. Agriculture, biotech, and manufacturing will all loose their sales tax exemptions on purchases of equipment and supplies. While a six percent tax may not seem like a lot, it’s actually devastating to business. These taxes will essentially be taxing “inputs” or items that are purchased in order to generate a product that is sold in the marketplace, which is typically when a product should be taxed. We are now going to be taxing items two or three times before they are sold. This added expense will put Connecticut business at a significant disadvantage to neighboring states.

In addition to all of these taxes, the legislature is hoping to put up to $700,000 million on its credit card by borrowing our way out of the 2009 deficit. Our children and grandchildren will pay our deficit spending if this bill passes the General Assembly. Governor Rell’s reaction to this package was appropriately strong. All of the months of her hard work to reinvent government has been completely ignored and replaced with a budget that does nothing to shrink and reorganize government and recognize that businesses and families cannot sustain more tax expenses. Our economy is on life support and the legislature is attempting to pull the plug.