Malloy Comes Closer To Answering the Tax-Increase Question

by Categorized: Politics, Public finance Date:

Everyone wants to know whether Gov. Dannel P. Malloy will try to raise taxes to fill the state’s budget deficit. On Monday, he clarified the issue — a little bit.

Republicans argue that he already has, with Friday’s “road map.”  Malloy argues that those revenue increases — a cap on companies’ use of tax credits, for $12 million, and the closing of a loophole for electric generators, for $10 million — are not tax increases.

It’s a matter of semantics, Sen. Andrew Roraback told Keith Phaneuf of The CTMirror.  That’s right, of course, but it matters because Malloy’s budget czar said two weeks ago the governor would not seek a tax increase.

Now that the $220 million road map and the $170 million in cuts announced 12 days ago more or less plug the hole for this fiscal year, we look ahead to the fiscal year that starts July 1.  Here again, in comments reported by my colleague Daniela Altimari, it’s clear that Malloy is not clear:

“I refuse to make a judgment. I don’t know about the fiscal cliff. How do I make a judgment about that without knowing whether we’re looking at across-the-board reductions or surgical reductions?”

Malloy is saying that defense cuts of $500 billion over 10 years, which the fiscal cliff would force, along with a similar-sized cut in non-defense spending, would collapse the Connecticut economy.  That would lead to more revenue shortfalls, which would require higher tax rates — real tax increase by anyone’s definition.

Well, the budget for the year that starts July 1 has an estimated shortfall of $1.06 billion. So it seems to me that Connecticut will need tax increases either way, since that’s 5 percent of the budget.

And cutting Medicaid won’t do the trick because starting in 2014, most health coverage for the poor gets a 90 percent reimbursement from the federal government.  Cutting out that spending would be dumb.

 

It’s easy to say we can cut an extra $1 billion out of personnel costs, but that would be 0ne-fifth of the state’s regular workforce, not an easy cut at a time when we’re under a no-layoff agreement, signed in 2011.

Getting back to whether the $22 million in added revenues from businesses comprise a tax increase, we just don’t know enough about them yet — one line each in the road map.  Malloy attacked the “tax increase” moniker in Monday’s remarks:

“We never said we wouldn’t look at revenue and obviously we are looking at revenue. We are limiting, perhaps for a period of time, the percentage of tax avoidance that a corporation can have by buying a financial product. That’s not a tax increase.

“And we are moving to close a loophole … That’s not a tax increase and that’s how I would define both of those things. The value of an alternative investment will be limited perhaps for a short period of time and likewise the loophole will be done away with.”

 

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2 thoughts on “Malloy Comes Closer To Answering the Tax-Increase Question

  1. Da Troof

    Nice job Governor of handcuffing the state by “negotiating” a no-layoff clause in the state workforce. Until people get real with addressing the real cost drivers of the state budget we’ll just keep nibbling around the edges.

    We get the Government we deserve. Keep electing liberals and watch the state circle the drain.

    1. Jimmy Boggs

      Perhaps no lay-offs was an agreement for one year. If not, that was a very short-sided agreement to make.

      Da Troof; Common Sense or Kimmerian?

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