Public Hearing in Stamford...
Connecticut's Tax System


Funding towns like it's 1999
Commenrtary at CT MIRROR
Orlando Rodriguez
July 6, 2010

When it comes to the state's funding of schools and towns, in Connecticut it is still 1999.

Our funding formulas are out-of-date and do not reflect changes in personal income since 1999. State laws require that income data in grant formulas come from the decennial census long form. Census 2000 data is currently being used and it is based on 1999 income. The recent 2010 census did not include a long form, and therefore did not collect more current income data. Consequently, we will forever be stuck with data from the 2000 census unless the state's statutes are updated to use another source for personal income data.

Income data play a major role in determining how much aid goes to municipalities for K-12 education, adult education, general operating expenses, and other services. For example, census income data are used a total of twelve times in the Education Cost Sharing (ECS) Grant, the Mashantucket Pequot & Mohegan Grant, and the Adult Education Grant.

There are only two alternative sources of data that provide income for towns. The American Community Survey (ACS) is the replacement for the Census Bureau's decennial census long-form. Data from ACS are updated yearly, but the data can have large margins of error, as the National Research Council (NRC) reported in 2007: "A weakness of the ACS compared with the long form sample is the significantly larger margins of error in ACS estimates..."

This is because the ACS surveys a relatively small number of residents in each city or town.
 Consider Stamford: ACS data from 2008 show total personal income in Stamford to have been anywhere from $4.8 billion to $5.9 billion, which is an error range of more than $1 billion.

Connecticut's less populous towns (less than 20,000 residents) are the most adversely affected by the inaccuracy of ACS data. As the NRC reports, "The larger ACS sampling errors are a particular problem for small cities, counties, and other governmental jurisdictions..." Over half of Connecticut towns have low populations that will result in margins-of-error that could be as high as 25 percent. Can we accurately allocate funding among towns using ACS data?

There is another source of town income data that is more accurate than the ACS. It is the Adjusted Gross Income (AGI) from the state's personal income tax returns. For 2008, tax return data show total personal income in Stamford was $5.9 billion, which is at the high-end of the ACS estimate. State tax return data show total personal income in Connecticut in 2008 at $143 billion, which is $13.5 billion more than the high end estimate from the ACS. Using income tax data as a benchmark, ACS understated personal income in 2008 in Connecticut by nearly $4,000 per resident.

Tax return data provide a more accurate, complete, and reliable picture of personal income for towns than the ACS. There are criminal penalties for filing false income tax returns and most households file tax returns. In contrast, the ACS is based on a small sample of the state's population and the data are not verified.

Connecticut residents have a vested interest in the accuracy of the income data that the state uses for calculating grants. Consider the measure of town wealth, Adjusted Equalized Net Grand List per Capita (AENGLC), calculated by the State Department of Education. A town's ranking on this wealth measure directly affects the level of state funding for adult education, school construction, pupil transportation, and health services. Currently, the department's calculations for 2010-2011 use $82,049 as the highest per capita income for towns -- based on 1999 data. However, 2008 income tax data from the Department of Revenue Services (DRS) results in $261,641 as the highest per capita income for towns. When 2008 income tax data are substituted for 1999 income data, the AENGLC rankings of 151 towns change - sometimes significantly. The town of Colebrook drops 75 positions from 54th wealthiest to 129th (1 is wealthiest). Mansfield jumps 37 positions from 155th to 118th.

The next session of the General Assembly must make it a priority to amend statutes to specify that Connecticut AGI, and other income data from state income tax returns, be used in state funding formulas. Using ACS income data is unacceptable when a more accurate alternative is available -- personal income tax data from the DRS. Or, we can continue to fund towns as if it were 1999 - forever.

Orlando Rodriguez is a Senior Policy Fellow at Connecticut Voices for Children based in New Haven.

House Dems Push For Regionalism; House GOP Leader Larry Cafero Asks, "Are You Kidding Me?''
By Christopher Keating, Courant,  on January 14, 2010 6:20 PM | Permalink | Comments (0)

Even though state legislators have been talking about - and studying - the benefits of regionalism for years, the House Democrats formed another commission on the issue Thursday.

Overall, 45 House Democrats are joining the MORE Commission, which could eventually have 75 members studying regionalism. MORE stands for Municipal Opportunities and Regional Efficiencies.

"We can be doing more with less,'' said House Speaker Christopher Donovan. "Our cities and towns have been hurt by the recession, and we've got to find new ways to help them.''

During a press conference at the state Capitol, veteran radio reporter Steve Kotchko - who has interviewed governors back at least to Ella Grasso and senators back to the late Thomas Dodd - had the first question. He asked why, after decades of talking about regionalism, does the state need another blue ribbon commission on the issue.

"I guess, Steve, keep trying,'' Donovan responded.

No Republican legislators were named to the commission, prompting extended comments from House GOP leader Larry Cafero of Norwalk.

Cafero told The Hartford Courant's Jon Lender that he has told Democratic legislative leaders that "we've got to work together here. It can't get any worse.  We talk and talk and talk about it separately with press conferences, etc., let's sit down ... and do something about this budget crisis together."

Lender reports as follows:

But then, Cafero said, "The next thing I know - without any warning, no notice, no phone call, no nothing ... he has a press conference with Denise Merrill saying we're going to make a blue ribbon commission. Are you kidding me? People are tired of blue ribbon commissions, task force, working groups, thinking groups, groupie groups, whatever. You know, I mean,  enough is enough. When it's time for action, let's act.''

Cafero continued, "We've had time for action when we've been in the legislature in session with bills before us that allow us to cut the size of government, cut government spending. They have refused to do so. To put this out to the public - we wonder why the public says, you know, aw the heck with all of you."

"We don't have to study it,'' Cafero said. "These mayors and first selectmen out on the front lines, they know what they need to do to work with each other. For the most part they're not prohibited to work with each other now.  But I think separate and apart from that, for the legislative leadership to come before the public at this time of crisis - yet another year passing - and say we're going to study the issue is insulting, and enough is enough.''

Holding up a press release with the list of 45 members, Cafero asked, "They put out a  list of those who are going to be on this committee? Talk about bipartisan reaching across party lines - every single member here is a Democrat.  I as the House Repubnlican leader wasn't even given a heads-up that they were going to do this. So you have to question the sincerity of it. You have to question, you know, is this just a grandstand move to show the public we're doing something? We're not doing anything. This is a joke, and it's about time that we took what we already know, what has been studied ad nauseum, and act upon it.''

In the Capitol press room, Cafero held up a quarter-inch packet of papers, entitled "Report on the State of Connecticut Blue Ribbon Commission on Property Tax Burdens and Smart Growth Incentives," dated October 2003.

"You know, in 2003 we had this task force, this blue ribbon commission on property tax burdens and smart growth incentives, much of which had to do with regionalization etc., etc.,'' Cafero said. "It had a price tag of over $700 million to implement.  It sat on the shelf and is still on that shelf - here it is, seven years later. The public is tired of this. They're saying 'do your job, act, get it done, work together' - and we're not doing that.  It's very, very frustrating.''

Donovan was asked about the all-Democratic nature of the commission even before Cafero made any comments.

"This is our initiative,'' Donovan said. "This is something we want to do.''

Donovan added that there are some misconceptions about the whole point of regionalism.

"They talk about it like it's big cities taking over small towns,'' Donovan said. "It's not that.''

House Majority Leader Denise Merrill, who stood next to Donovan during the press conference, said later that taking a regional approach to special education would "save a lot of money on legal costs.'' Appeals of special education questions could be handled by a regional panel "instead of having every town get their lawyer'' to represent the local school board.

In an attempt to obtain special education services for their children, parents often appeal to the local school district, and sometimes they are rejected. Some attorneys specialize in these appeals, and the services are sometimes restored if legal action is threatened.

Currently, that is generally handled on a town-by-town basis. With a regional approach, the process could be cost effective, Merrill said.

In her hometown of Mansfield, Merrill said, there are three superintendents of schools because of how the system operates. The regional high school, E.O. Smith, has both a superintendent and a principal. Then two separate kindergarten through eighth grade systems have superintendents - reaching a total of three.

The three systems have three different special education directors and three curriculum supervisors, and many of the superintendents and top administrators are paid about $150,000 each, she said.

The system has been operating this way for many years.

"At the local level, it's very difficult, politically, to go in there and lay someone off,'' Merrill said.

Scope of Study:  Connecticut’s Tax System (Program Review and Investigation)

Background

Connecticut’s state and local tax system relies heavily on a few major taxes to fund most of its state and local services. The bulk of the revenue comes from the state income tax, local property tax, state sales and use tax, state excise taxes, and business taxes. Recently, concerns have been expressed that Connecticut’s overall tax system is too reliant on the property tax to support needed public services. Such was a finding of the legislatively mandated Blue Ribbon Commission on Property Tax Burdens and Smart Growth Incentives in 2003.

There have been studies of various aspects of Connecticut’s state and local tax system in the past several years. However, there has not been a comprehensive look at the entire system since the state personal income tax, a significant system change, was enacted in 1991. The concurrent creation of the Connecticut State Tax Review Commission appeared to contemplate such reviews, but the commission has been dormant for some time.

Currently, there is interest in conducting an overall examination of the entire tax system used in Connecticut now -- rather than when the state is facing a severe budget crisis and needs to take significant measures to balance the budget -- to evaluate how well the system is performing in providing a well-balanced, reliable revenue stream to fund services in the 21st century.

Area of Focus

A two-phased approach is contemplated for this study. The first phase will examine Connecticut’s state and local tax structure to determine how well the system performs based upon nationally recognized criteria. Depending on the outcome and findings in the first phase and the desire of the committee, the second phase may examine various alternatives for change, their potential benefits and drawbacks, and how different options might impact various taxpayers in the state.

Areas of Analysis

Ø Provide background information on tax policy and state tax structures.

Ø Describe and analyze Connecticut’s tax structure focusing on: 1) personal income tax; 2) state sales and use tax; 3) business taxes including taxes on corporations, public service companies, insurance companies, and oil companies; 4) local property tax; 5) state excise taxes including those on cigarettes, alcohol, and motor fuels; and 6) the inheritance and estate tax. The examination would include revenues generated, the proportion of revenues generated by each and trends over time, and the proportion of state vs. local revenues that are used for major categories of state and local services.

Ø Describe and analyze who pays each of these taxes, how they are collected, the level of compliance, and the efficiency of administering the taxes.

Ø Describe and analyze the major exemptions and credits associated with each tax component.

Ø Identify and examine models, best practices, and evaluation criteria for tax systems. Using such criteria, including the nine principles established by the National Conference of State Legislatures (NCSL) for a high-quality state revenue system, the study would analyze and evaluate how well Connecticut’s system incorporates the following features:

• Complementary -- using various elements of local and state revenues to finance services;

• Reliability and adequacy -- stability, certainty, and sufficiency are achieved in raising revenues, without the need for continuous or drastic changes in the tax rates, the tax base, or major spending modifications;

• Balanced -- using a diverse range of different taxes with a broad base, and appropriate proportionality exists in the revenue system;

• Equitable -- distributing the tax burden fairly across taxpayers, imposing a similar burden on people with similar circumstances, and minimizing the amounts that lower- income groups must pay;

• Promotes compliance -- avoids complex forms and filing requirements, minimizes the number of exemptions and credits, and includes policies and practices that are recognized as fair, understandable, and uniformly applied;

• Fairly administered -- promotes fair, efficient, and effective methods in assessing, applying, and collecting taxes in a cost-effective and efficient manner;

• Economic competitiveness -- recognizes that the tax system is integral to promoting economic development, especially when compared with neighboring states, but that tax burden is only one factor affecting the competitive nature of the business climate;

• Neutral -- separate from spending decisions, minimizing use of tax exemptions, credits, or earmarking of revenues, and closely monitors these modifications to ensure they are having the appropriate outcomes; and

• Accountable to taxpayers -- ensuring that tax laws are clear, that all aspects of revenues raised (or forgone in the form of tax expenditures) are reported, that proposed changes are well publicized, and that taxpayers have an opportunity for input.

Areas of Analysis Excluded or Limited

The study would rely on existing incidence information and would not conduct a comprehensive primary incidence analysis on how any one of the taxes, or the system as a whole, impacts different income groups. The committee may wish to explore the need for conducting such a tax incidence analysis, as well as how such an analysis might be undertaken. Also, the study would not examine the adequacy of current state and local expenditures.


State changing its estate tax law:  Thresholds are higher, rates lower
Stamford ADVOCATE
Posted: 09/12/2009 12:19:57 AM EDT

Many wealthy Connecticut residents will no longer have to flee to Florida to avoid the Connecticut estate tax because of a new law enacted Sept. 8 (House Bill 6802).

Neither will people have to deal with the Connecticut "cliff."

Beginning with deaths occurring on or after Jan. 1, 2010, estates (and gifts) of as much as $3.5 million will be exempt from Connecticut estate (and gift) tax. That moves the threshold for taxable estates (and gifts) up from the current $2 million level.  Importantly, the new law will lift the Connecticut "cliff" where a single U.S. dollar bill counts as $101,700 in Connecticut.

The cliff, which will die on Jan. 1, 2010, is an unfair happenstance for estates a smidge over $2 million. Right now, an estate of $2 million pays no Connecticut estate taxes. But, an estate of $2,000,001 -- just a dollar more -- pays Connecticut $101,700.  These are two very important estate tax changes. And there is one more. The new legislation also reduces rates by 25 percent beginning in 2010.

"These changes are a step in the right direction," says state Rep. Livvy Floren, R-149th Dist.

Under current law, an estate (or gift) of $3.5 million pays a Connecticut estate tax of $190,800, according to the state Office of Fiscal Analysis. Under the new law, for deaths occurring after the end of 2009, the tax will be zero, and there will be no cliff -- that is, the tax for estates above $3.5 million will be taxed only on the amounts above $3.5 million. The tax rate is 7.2 percent for estates of $3.5 million to $3.6 million, down from 9.6 percent.

Here are a few more comparisons.

An estate of $5.1 million currently pays $402,800 to Connecticut; the new tax will be $130,200 for deaths occurring after the end of the year. A $10.1 million estate pays a little over $1.08 million; after 2009, the tax will be $640,200, taxed at the highest marginal rate of 12 percent, down from 16 percent.

What does this mean to you?

If your estate is $3.5 million or less, and you've been planning to establish your residence in another state to avoid Connecticut estate taxes, there will be no need after Jan. 1. Likewise, if you have an estate of around $2 million and have been planning to gift assets to avoid the cliff, you won't need to bother after the end of the year.

We still don't know whether changes in the federal estate tax are looming. As of now, the federal threshold for a taxable estate is $3.5 million, meaning estates less than $3.5 million pay no federal estate tax. Next year -- for one year only -- the federal estate tax is zero for all estates of any size.  In any event, you'll want to revisit your estate plan with your attorney sometime soon.

Before we leave the subject, there is one more major change in the Connecticut law.  According to the state Office of Fiscal Analysis, for deaths occurring on or after July 1, executors have to file Connecticut estate tax returns (and pay taxes due) within six months of the decedent's death. That's three months less time than was allowed under the old law in effect for deaths before July 1.

Julie Jason, JD, LLM, author of "The AARP Retirement Survival Guide: How to Make Smart Financial Decisions in Good Times & Bad," is a money manager and principal of Jackson, Grant Investment Advisers, Inc. of Stamford. She welcomes questions for consideration in her column. Please e-mail her at readers@juliejason.com or write to her c/o The Advocate and Greenwich Time, 9 Riverbend Drive, South, Building 9A, Box 4910, Stamford, CT 06907. Copyright 2009 Julie Jason.


Read Minority Leader of the House's comment here...

Connecticut only number 3!  How about County taxes in NY and NJ?  We don't pay those!!!
Overburdened taxpayers a key issue in Stamford's mayoral election
Stamford ADVOCATE
Posted: 09/03/2009 05:36:11 PM EDT
By Rich Schneider

A possible game-changing Stamford mayoral election is two months away. So far the candidates do not appear to have addressed the key issues facing the city.

At the top of the list is fiscal responsibility.

This year Stamford property owners had to endure another property tax hike despite having to deal with the largest decline in the economy since the Depression of the 1930s. Many Stamford property-tax payers have lost their jobs and health care coverage and faced home foreclosures. These financial burdens have been compounded by higher property taxes.

This has largely occurred because Stamford's current administration and the Board of Representatives have locked the city into municipal worker wage increases. One of the mayoral candidates, David Martin, must take responsibility for some of this as the chairman of the Board of Representatives.

This year, after many taxpayer complaints, the city renegotiated with several of the city unions, resulting in pushing out some of the increases and lessening the tax increase. However, it still was an increase during the worst of economic times. A recent insightful Advocate article (Angela Carella column, Aug. 16) documented that as a result of these negotiations the city is locked into wage increases for the next couple of years, plus has agreed in many cases to no layoffs.

Municipal worker pay is by far the largest part of the city's budget. Another issue is the expectation of a rising pension burden for the municipal workers. How is all of this going to be paid? At this point, it looks like Stamford property-tax payers can expect yearly tax increases. Also, businesses will be discouraged from locating in Stamford because of rising property taxes.

To put this into a broader context, a Wall Street Journal editorial published this past Saturday was solely devoted to Connecticut's tax burden. The editorial indicated that Connecticut collects $7,007 in state and local taxes per "man, woman and child resident." According to the Tax Foundation, this is more per capita than every state but New York and New Jersey. This has contributed to Connecticut businesses having hired zero net new workers since 1992 while the U.S. has added 22 million new jobs. "As the tax burden has surged the state has lost population to other states in every year in the last decade except one." The editorial focuses on Connecticut's income tax. However, the city of Stamford is a key contributor to this rising tax burden of Stamford residents.

What are we receiving for these high taxes? In Stamford, we are facing many issues, including a need to improve the city schools, roads that are in need of repair, a Police Department that needs to be overhauled, etc.

The motto is Stamford is the "City that Works." It works for the municipal workers who have been getting nice wage and pension increases, and many of them aren't Stamford taxpayers. It has not been working for many overburdened Stamford property-tax payers.

As this election approaches, we need to understand the mayoral candidates' positions on these fiscal issues. How can they provide needed services without continuing to overburden property-tax payers? So far, candidate Michael Pavia has indicated he will hold the line on several municipal worker contracts that are currently up for renewal, which is a good first step. Candidate Martin indicated he is studying the contract renewal situation. We need to know much more about how they and the candidates for the Board of Representatives will handle these fiscal issues including taxes. These issues have to be addressed now. We don't want Stamford facing a budget crisis in its future, further overburdening its property-tax payers.
Republicans: Wealthy Already Paying Their Fair Share On Income Taxes
The Hartford Courant
By CHRISTOPHER KEATING 
July 27, 2009

Frustrated Democrats have been asking the same question for months: When are the rich going to pay their fair share?

State employee unions are also asking — broadcasting television commercials depicting wealthy fat-cats smoking cigars and brandishing brandy snifters as Republican Gov. M. Jodi Rell has avoided tax increases on the rich and corporations. The unions have spent about $400,000 since February on radio, television and cable advertisements in their campaign for tax fairness.

But Sen. L. Scott Frantz, R-Greenwich, says the rich are already paying their fair share.

In fact, Greenwich paid more than 14 percent of the state's entire income tax bill in 2007, or nearly $759 million, according to state records. When Greenwich is added to three other lower Fairfield County communities — New Canaan, Westport and Stamford — the total jumps to more than 25 percent of all income taxes collected.

Having only four of the 169 towns pay for more than 25 percent of the income tax bill certainly constitutes a fair share, Republicans say. In addition, those communities receive only a tiny fraction from the state in educational cost-sharing funds to operate their local public schools.

"We get back less than 1 percent of the money we send to Hartford," said Frantz, a business executive who is in his first year as a state senator.

The question of raising the state income tax lies at the heart of the five-month struggle over the state's projected $8.55 billion deficit for the next two fiscal years. Rell and the legislature have been battling at polar opposites on the tax question. Although Rell says the budget can be balanced without any tax increases, Democrats responded with a plan that hiked taxes by $2.5 billion over two years. Rell immediately vetoed the Democratic plan, and the state began the new fiscal year on July 1 without a budget. Connecticut is one of only three states still operating without a budget and is, instead, running on month-to-month executive orders signed by Rell.

With the income tax and tax fairness at center stage, the two sides have been negotiating at the governor's mansion, but they have still not reached a deal.

"We're making progress, but the progress is glacial," said Senate Majority Leader Martin Looney, D-New Haven. "We don't like the idea of governing by executive order."

Senate Republican leader John McKinney of Fairfield agreed that progress has been slow.

"There's still a lot of tough work to do," McKinney said. "It's not going to be easy."

McKinney and his fellow Republicans have voted against raising the income tax, and only 19 of the 24 Senate Democrats voted last month in favor of the increase. As such, the Senate was far short of the 24 votes — or two-thirds of the chamber — needed to override Rell's veto.

Like many Democrats, Shelley Geballe, the co-founder of the liberal-leaning Connecticut Voices for Children, says the rich should pay more than they do. Geballe has written extensively about the issue, saying that politicians and the general public need to look at the entire picture of taxation — meaning the income, sales and property taxes that residents pay. By that measure, the middle class pays a higher percentage of its income in overall taxes than the wealthy.

"The people in the top 1 percent — both before and after the federal tax deductions — are paying a far smaller share than the bottom 80 percent," Geballe said.

Without tax increases, Geballe is concerned that if Rell and the legislature cut too many vital social services, then "you've eroded the quality of life in the state of Connecticut." Those highly important budget decisions will be made behind closed doors in the weeks and months ahead.

"I see it as a pivotal moment in the state's history," she said.

At the opposite end of the philosophical spectrum is the Yankee Institute for Public Policy, a conservative counterpoint to Voices for Children that analyzes much of the same data.

The Yankee Institute studied the tax filings at the state Department of Revenue Services that outline the number of income tax filers in various income categories. The institute's report showed that 46.8 percent of all state income taxes in 2007 were paid by residents living in Fairfield County. That is more money than those living in six of the state's other eight counties — Litchfield, New Haven, Middlesex, Tolland, Windham and New London — combined.

The report noted that the top 6 percent of Connecticut taxpayers — earning more than $250,000 annually — pay more than the bottom 94 percent combined. It also showed that those earning more than $1 million annually in 2007 paid 35 percent of the income tax bill.

"It's easy to bash the rich and say they aren't pulling their weight, but we did the math," said Fergus Cullen, the Yankee Institute's executive director. "The idea that you can use the successful as a mule to carry the load for everyone else is wrong. ... There's no one else out there arguing the other side. "

The institute, Cullen said, published its report because "we wanted to make sure that the demagogues on the left who blamed the rich and were using them as the whipping boys" had a counter-argument.

The amount of income-tax money coming out of lower Fairfield County is even higher than many Hartford-area residents realize. In the Hartford area, the suburbs of Farmington, Glastonbury, Simsbury and Avon are generally considered upscale areas with wealthy residents.

In Greenwich, though, the residents paid an average of nearly $29,000 in state income tax per return — more than five times higher than Farmington's average of $5,410 per return. Greenwich residents also paid more than three times those in Avon paid per return and almost five times higher than Simsbury residents.

But Matt O'Connor, a spokesman for the state employee unions, said the tax issue is actually quite simple.

"We just need to raise rates on the wealthiest in Connecticut," O'Connor said. "Despite what the Yankee Institute claims in its most recent study, the wealthy in Connecticut are doing pretty good. The Greenwich hedge fund manager is certainly seeing lower numbers on his balance sheet, but he still has the second home on Long Island and the vacation home in the south of France and the fleet of cars. He's still living large."

Copyright © 2009, The Hartford Courant

Realities, not myths, about state budget
By William H. Nickerson
Greenwich TIME
Posted: 02/11/2009 07:25:06 AM EST

The grave national recession is a significant factor driving Connecticut's state budget into deficit. However, another factor involves fundamental flaws in the Connecticut budget-making process centered around long-held myths.

Unlike the federal government, which can (and does) spend without legal limits, the Connecticut Constitution requires a balanced budget. In this very difficult year, like a doctor examining a patient, we must look beyond surface symptoms and seek underlying causes before prescribing a remedy. Herewith a myth list and proposed cures.

Myth 1: "The legislature is equipped to deal with current deficits because it has cut the budget before."

Reality: The budget has never been cut. In the real world, when a person's income is "cut," it means they will have less money to spend today than they did yesterday. In contrast, the General Assembly uses the word "cut" to mean only a reduction in the rate of expenditure growth. For example, if a two-year budget for a department is set at $100 for the first year and $106 in the second year, and then the second year budget is reduced to $104, this is referred to as a "Draconian cut" -- you may have heard that term. In reality, if the same had happened to Mr. and Mrs. Connecticut's family income, they would view it as a 4 percent increase. This is the year for real "cuts."

Myth 2: "The constitutional cap on budget increases is a mere 'guideline.' "

Reality:The spending cap is no more a guideline than is any other part of the Connecticut Constitution. The entire constitution, spending cap included, is a sacred covenant between the voters who approved it and the legislators who are expected to carry it out. Some misguided legislators have characterized the spending cap as a guideline so as to evade it by such gimmicks as off-budget appropriations and declarations of "emergencies," which were, in fact, nonexistent. If ever there was a time to affirm the legal, moral and financial vitality of this part of our state constitution, it is now.

Myth 3: "Each year, government programs are rigorously evaluated by the Legislature with unworthy ones reduced or eliminated and effective ones expanded."

Reality:This never happened in my 22 years in Hartford. Instead, the legislature takes a "top-down" approach, beginning with a projection of what it will cost to carry forward all of the government programs and services from the preceding year to the next. This is called the "Current Services Budget" and invariably shows significant spending increases. There then ensues a pulling and hauling among legislators largely focusing on which line item has the most political support. However, there is no fundamental examination of broad-based program effectiveness. In fact, there is no institutional framework available to legislators to even undertake such an examination.

As a result, over the last five years, budget increases have averaged 6.1 percent annually, exceeding the rate of inflation every year but one. The largest single increase was 11.8 percent in 2006. What Connecticut needs now is a "bottom-up," zero-based budget. Each program is then assumed to be funded at zero and is subject to a rigorous nonpolitical evaluation of what works and should be expanded and what doesn't.

Myth 4: "Connecticut has a nonprogressive income tax, which is unfair because middle-income earners are overtaxed and the rich don't pay their fair share."

Reality:This myth is particularly enduring, yet it ignores the fact that the income tax structure has undergone significant changes to the credits, exemptions and brackets since the tax was enacted 18 years ago.

Today, the typical Connecticut home-owning household of four at the median income level of $53,000 pays little or no income tax. At the other end of the spectrum, a tiny group of only 43,000 families pays approximately one-half of the entire income tax revenue. As Casey Stengel would say, "You can look it up!" This tax burden allocation explains the apparent anomaly whereby Connecticut has lurched from surplus to a huge deficit in a span of only two years. The current tax structure is highly volatile, so that when this tiny group has a good year, income tax revenue jumps up rapidly. When this group catches a cold, as now, income tax revenue drops precipitously.

We have now come to a place where we have achieved the exact opposite of what the original income tax framers intended in 1991, which was to replace a then-jumbled patchwork of creaky taxes with a steady income stream. Obviously, if a tax increase were imposed now, it would simply exacerbate this already unsustainable volatility and would magnify future deficits.

------

William H . Nickerson is a Greenwich resident and former state senator representing the 36th District.

Conveyance tax receipts continue to grow
Stamford ADVOCATE
By Donna Porstner
Published November 25 2007

STAMFORD - Conveyance tax revenues have been a windfall for Fairfield County municipalities during the real estate boom in recent years, generating millions of dollars to subsidize municipal services.

With a national downturn in the housing market, one would think that revenue source may be drying up, leaving taxpayers to pick up the slack. But here on the Gold Coast, a hot commercial market has more than made up for a slight decline in the residential market.  Stamford collected $5.3 million in conveyance taxes for the fiscal year that ended June 30, up from $4.9 million the year before, despite a dip in prices for single-family homes.

Norwalk, which has a higher conveyance tax rate than other towns in the area, collected $6.2 million. In Norwalk, property owners pay $5 per $1,000; in Stamford they pay $3.50 per $1,000; sellers in Greenwich, Darien and New Canaan pay $2.50 per $1,000.  Because conveyance taxes are based on a percentage of the sales price, the revenue is tied directly to the volume of transactions as well as sales prices. The seller pays conveyance taxes to the town and state at closing.

In Norwalk, where house prices are declining for the first time in 15 years, Finance Director Thomas Hamilton said conveyance tax revenues have remained steady because of large commercial real estate transactions.  The recent sale of the Priceline.com building on Connecticut Avenue alone generated about $500,000 in conveyance tax revenues for Norwalk, he said.

The median price of a single-family home in Norwalk dropped 4.5 percent to $525,000 in the first nine months of the year, down from $550,000 for the same period last year, according to Boston-based Warren Group, which publishes The Commercial Record and tracks the real estate market in New England.

The only noticeable decrease so far is in land record recording fees, because homeowners are not refinancing as they were a few years ago, Hamilton said.

"We've seen those numbers come down," he said.

In Stamford, where the median sales price dropped this year for the first time in 12 years, conveyance tax revenues have been steadily increasing because of a hot commercial real estate market and an active condo market.  The city already has collected more than $6 million in conveyance taxes since July 1, largely because of the sale of seven downtown office buildings by the Blackstone Group for a record $850 million in August.  That sale generated $2.5 million for the city's coffers -more than Stamford collected annually just five years ago.

The median price of a single-family home in Stamford dropped 4.1 percent to $695,000 for the first nine months of the year, down from $725,000 for the same period last year, according to The Warren Group's statistics.  While house prices are down in Stamford and Norwalk, condo prices continue to increase.

Mike Feldman, a Stamford real estate agent who has lobbied against the conveyance tax on behalf of the Connecticut Association of Realtors, said it's dangerous for communities to balance budgets on conveyance tax revenues. The market is cyclical, he said, and towns will have to hike property taxes to make up for the lost revenue when it slows.  The National Association of Realtors projects home sales volume nationally will drop to 5.7 million this year, down from 6.5 million in 2006. Prices are forecasted to decline nationally 1.7 percent at the same time, down to a median price of $218,200.

The Stamford market remains strong despite prices leveling off, but the current sales volume won't last forever, Feldman said.

"Once the city of Stamford has a taste of that money, and once Antares stops buying properties -Êbecause they will stop at some point -Êour property taxes are going to go right through the roof," he said. "We'll be right up there with Westchester (County, N.Y.)."

Antares Investment Partners of Greenwich has been purchasing properties in the city's South End as it prepares to build its Harbor Point redevelopment project, which includes former industrial properties once owned by Pitney Bowes Inc., Yale & Towne and others.  Feldman said municipalities have become dangerously dependent on conveyance taxes since 2003, when the state raised the local portion of the tax from $1.10 per $1,000 to $2.50 per $1,000 to offset a decline in state aid.

Norwalk was among a select group of towns that was allowed to raise their tax even higher in 2003.  Stamford also had the option but didn't raise the tax until May, when the Board of Representatives increased the rate to $3.50 per $1,000.

The conveyance tax was supposed to expire after one year, but state lawmakers have extended its term. The longer the higher tax stays on the books, Feldman said, the more likely it will stay.

"We've been telling them for six years, on a state and local level, they cannot rely on real estate transactions as a steady stream of revenue," said Feldman, a former chairman of the Realtor association's Issues and Advocacy Committee and a former president of the Stamford Board of Realtors.  He said the problem is politicians prefer the conveyance tax to other taxes because sellers often don't find out about it until it's too late to back out of a sale.

"If they raise property taxes, every one of their constituents is going to go down to town hall screaming," Feldman said. "If they raise conveyance taxes, most of their constituents don't know about it."

Even if real estate prices continue to drop in Stamford, the revenue will continue to stream in as long as homes keep selling, said Randall Skigen, who chairs the Board of Representatives' Fiscal Committee. 
Dropping prices is not as big a concern as houses sitting on the market without buyers, he said.

"If they can still sell their home, that's still bringing in conveyance taxes," Skigen said.
Why A Transportation Expert?
Hartford Courant editorial
May 11, 2007
 
The state Senate president questioned Wednesday why Gov. M. Jodi Rell would appoint a transportation expert as economic development commissioner.

The answer: because transportation drives economic development. Gridlock is turning Connecticut into "a giant cul-de-sac, an eddy in the economic stream," in the words of regional development guru Michael Gallis.

A congested Connecticut can't compete. I-95 is a parking lot at rush hour. We're moving far too little freight by rail. Airports are limited to mostly domestic flights. We're stuck in a car-commuting society with gas at more than $3 a gallon.

Joan McDonald has worked on large transportation and redevelopment projects around New York City in the public and private sector, and she has served as a budget expert at the New York state Assembly. Her credentials seem a good fit with the mission of creating 8,000 new jobs in Connecticut - carefully.

Connecticut lags behind the nation in job creation and entrepreneurship. It has taken three years to come close to regaining the 62,600 jobs lost in the recession of 2004.

As important as growing jobs, though, is doing so wisely - in places that can be served by different modes of transportation; where natural resources aren't stretched beyond capacity; where clusters of innovation and creativity can thrive.

The governor's new appointee in this critical post has the credentials to balance economic growth with responsible, transit-sensitive development.
 

Property taxes move to front of political races
By RAY HACKET , Norwich Bulletin
October 25, 2006

NORWICH -- During an election season, the burden of paying property taxes is often cited as a "top priority" by candidates seeking elected office. But nothing brings the issue home faster than when a community undergoes a property revaluation.

"I saw a significant increase, about 50 percent," said Keith Mosher of Putnam.

Putnam went through its last revaluation in 2003, and the effects are still being felt.

And Mosher, like many other Eastern Connecticut property owners, has little faith talk during the campaign will translate into an ease in the property tax burden in the coming year.

"They always talk about it," said Rita Schelling of Norwich, "but nothing ever gets done. I don't think it's very high on people's lists."

But, this year, the issue has emerged as a focal point of the elections.

Gov. M. Jodi Rell and Democratic gubernatorial challenger New Haven Mayor John DeStefano have made it part of the centerpieces of their campaigns, each offering very different plans on how to address property tax relief.

However, it is a decision that will ultimately will be made by the members of the General Assembly.

Democrats are the majority in the state House of Representatives, holding 99 seats compared to just 52 for Republicans. It is expected Democrats will maintain that majority after this year's election, and potentially add to the party dominance.

"You might see a marginal shift, but I wouldn't say a major trend," said Ken Dautrich, director of the University of Connecticut Center for Research & Survey Analysis.

Democrats hold 12 of the 16 House seats in Eastern Connecticut. Of the four Republican seats, one is open this year as State Rep. Lenny Winkler, R-Groton, makes a bid for state Senate, and first term incumbent State Rep. Michael Albert, R-Woodstock, faces a strong challenge from Democratic newcomer Sherri Vogt of Brooklyn. Both districts have higher Democratic voter registrations.

"These races are virtually invisible," Dautrich said. "Name recognition drives how people vote, and party affiliation drives the rest."

A couple of incumbent Democrats also are in tight races this year. First term State Rep. Ed Jutila, D-East Lyme, is facing a strong push from Republican challenger Paul Formica, also from East Lyme, and Norwich State Rep. Jack Malone is in a tight race with Republican challenger Norwich City Council Alderman John Crooks.

Property taxes are a key issue in those and the other state House races. And what drives the property tax issue is the rising cost of education, and dwindling percentage of state education aid to cities and towns.

Philvie Laguerre, a Democrat in Norwich, said she's most concerned with getting education funding issues addressed by candidates in the coming election. She has four children in the Norwich Public Schools and said there needs to be more money going to schools so the classrooms aren't overcrowded.

"Now with the two casinos, we have people coming from all different states and places and it's really getting bad," she said. "There's too many kids in one class."

DeStefano is proposing a plan to freeze property taxes for seniors, increase the property tax credit on state income tax forms to $1,000 and eliminate the personal property tax on manufacturing machinery.

He's also proposing a minimum 50 percent share of local education costs be paid by the state. He would finance his plan by imposing a higher income tax rate on individuals earning more than $500,000 a year.

Rell is committed to re-introducing her proposal to eliminate the property tax on automobiles.

"I believe that's a waste," said Dave Wigfield of Lebanon, president of Stadium Motors in Franklin. "No one is struggling to pay car taxes. I'd rather see something done about real estate taxes. Property values keep going up, but income isn't -- and that's a struggle."

Pollster Christopher Barnes, director of the University of Connecticut Project Development, believes one reason property tax reform is so difficult is because most voters have not yet made the connection property taxes are determined on the local level -- but reform can only come on the state level.

"Much of the electorate has trouble processing this issue," Barnes said recently after an address to the Connecticut Conference of Municipalities, where he said again he had no hope for any real reform soon.

"While municipal leaders understand that this problem is something that needs to be solved on the state and federal level, most voters haven't made that connection yet," he said. "Instead, voters see it as a local problem, and expect local leaders to solve it."

And without that voter focus on Hartford, there is little pressure on those who can do something, he said.
Rell Makes New Offer For Car-tax Plan; Senior citizens would keep credit for property taxes
DAY
By Ted Mann
Published on 3/29/2006
 
Hartford — As the legislature's tax- and budget-writing committees near their deadlines to draft a midterm budget, Gov. M. Jodi Rell is trying to breathe new life into her own plan to eliminate the tax on motor vehicles, by allowing some senior citizens to retain a $400 property tax credit.
Rell reacted Tuesday to concern among some seniors that they would be harmed, not helped, by the governor's proposal to end the tax on personal vehicles, and to pay for the cut in part by eliminating the property tax credit, which is currently worth $350 and is scheduled to rise to $400 on July 1, the same day the new midterm budget would take effect.

“What I'm proposing would allow eligible seniors to continue receiving the property tax credit on their state income taxes and stop paying the local car tax,” Rell said in a recorded statement released by her office.

“So, what we're saying is these hard-working men and women, who've spent their lives contributing to our economy, have earned a tax break.”

The governor's proposal, which she acknowledged had come after complaints about the elimination of the tax credit from senior citizens, would let those aged 65 or older who file singly, jointly or as the head of a household continue to take the credit.

That benefit will not come without cost: Rell's staff said extending the credit for seniors would be paid for with a $15 million “adjustment” in the governor's proposed midterm budget. No further information was available Tuesday night to show where that budget cut would be made.

Rell presented her altered plan as a “compromise,” but that did little to placate the legislature's Democratic leaders, who have criticized her car tax proposal as flawed and likely to hurt individual municipalities, since they would be dependent on the state to replace the revenues cities and towns would otherwise raise by taxing cars.

“The governor's original plan to eliminate the car tax was paid for in large part by an increase in the income tax on middle- and lower-income residents, including many seniors,” said Williams, a reference to the cut in the tax credit. “Today, she offered not to raise taxes on seniors to pay for her plan. That's not much comfort.”

“The governor's movement on the issue shows the administration knows the plan is seriously flawed,” Williams added in a written statement. “When her plan means income tax increases for the middle class, lost revenue to cities and towns, and the biggest beneficiary of the plan are multimillionaires, it's a problem.”

Meanwhile, the Democrat-controlled committees responsible for writing the legislature's midterm budget are approaching their end-of-session deadlines. The Appropriations Committee must complete its work Tuesday, and the Finance, Revenue & Bonding Committee — which drafts the legislature's proposed tax changes — must finish its efforts one week from Thursday.
From the New London DAY (figuring out what "car tax" proposal means to its readership):
http://www.theday.com/re.aspx?re=cca3cb20-b25f-4aa8-920d-f26a74c67700

Are you a winner or loser?
By Keith Phaneuf, Journal Inquirer
02/20/2006

HARTFORD - A poll taken immediately after Gov. M. Jodi Rell unveiled her plan to repeal the property tax on motor vehicles showed just over half of Connecticut's voters like the idea.   That's despite heavy criticism of the Republican governor's plan from Democratic legislative leaders and Rell's gubernatorial rivals.

But whether the plan survives when the next state budget is resolved this spring - and, if so, in what form - may well hinge on a number of analyses that are underway.  The challenge now for many lawmakers is to determine who wins under the Rell plan, who loses, and whether the large, voting middle class benefits enough.

"This is a bold step to eliminate a regressive tax and put millions of dollars back in the economy," Rell said when she unveiled the plan this month in her state of the state address. "It is a step which will make Connecticut a much more attractive place to live, while reducing the financial burden on the average working family."

The last part of that statement may prove to be the litmus test for the proposal: Will it reduce the burden on working families?

Rell and her fellow Republicans in the General Assembly say 'yes.'  Democrats, who hold majorities in both the House and Senate, have been far more skeptical.

Much of the debate centers not just on the property tax, but on the state income tax.  That's because the governor wants to make sure that if she cancels the property tax, the state will reimburse cities and towns for the nearly $500 million in car taxes they would lose.

And to come up with more than half of that money, the governor would cancel an income-tax credit. Specifically, Rell would end the credit that allows filers to increase their refunds, or reduce their income-tax obligation, by up to $350 if they paid at least that much in local property taxes - on a vehicle, house, condominium, or land.  So if there's something to gain and something to lose under the governor's proposal, who comes out ahead, and who loses ground?

* Renters.  Most people who don't own a home or a condominium and who own one or more cars would at least break even, or, in many cases, gain under the Rell plan. 
For example, an individual or a couple set to pay less than $350 in car taxes this summer - say $200 - would break even financially but still gain a slight perk.  Under current law, that household would reclaim the $200 paid this summer in the spring of 2007, when the next state income-tax return is filed. Rell's plan would eliminate that $200 obligation as well, but would make the money available this summer.

For renting households with two cars, those with one more expensive vehicle - such as a sports car - or even those with a modestly priced car in a high mill-rate city, like Waterbury, property taxes owed likely would exceed $350.  In that case, renters would gain under the Rell plan, since their $350-plus property-tax bill would be canceled, but the maximum income-tax credit they can claim under current law remains at $350.

* Upper middle class - and beyond.  This is the trickiest category to determine who wins and who loses.  That's because while the maximum property-tax credit allowed is $350, the current system begins to scale that credit back as a household earns more money.  For singles, the credit starts to shrink once their earnings top $55,500, and vanishes once they surpass $145,500.

For couples, the thresholds are $100,500 and $190,500.  In this group, many home- or condo-owning households might receive little or no income-tax credit under current law.  They wouldn't lose much if the credit vanishes under the Rell plan, but could gain quite a bit if hundreds of dollars of car taxes, or more, are eliminated.  But this scenario also draws some of the heaviest criticism from Democrats.  That's because a wealthy household, owning the most expensive cars, stands to gain the most.

"It is clearly not worth ending the motor vehicle tax system" to provide relief for this income group, said Lt. Gov. Kevin B. Sullivan, a West Hartford Democrat and one of the Capitol's strongest advocates for higher estate or income-tax rates on the very wealthy. "The legislature should not embrace this flawed idea."

* Homeowners with no car.  Officials on all sides of the debate concede this likely is a very small subgroup. Still, people in this category would lose out under the Rell plan, being unable to claim an income-tax credit for the taxes paid on their home, but gaining no benefit from the repeal of the car tax.

* Taxpayers with dual-purpose vehicles.  Those taxpayers who have vehicles, such as a pickup truck, registered for both commercial and noncommercial use could lose ground under the governor's plan. But that's difficult to determine because of several factors, including whether they own other vehicles.  That's because dual-use vehicles still would be subject to the property tax under Rell's plan.

For example, a family with one car for personal use and a pickup registered for dual use likely would pay more than $350 in car taxes each year. But, depending on the value of that car and tax rate in the town where they live, they might save less than $350 if the taxes on that car are eliminated.  Also, though, owners of vehicles registered for dual purposes continue to retain a tax benefit under the governor's plan. They could claim the depreciation on those vehicles on their income taxes.

* Homeowners with low car taxes.  This may be the group that has lawmakers most worried, because it is so hard to define.  For example, a Manchester middle-income family with a modest house and one or even two older cars would pay well over $350 in total property taxes, but possibly less than $350 in connection with their vehicles.  Under the governor's plan they would lose their $350 income-tax credit, but gain less than $350 of relief through the elimination of their car taxes.  This is more likely the case for homeowners with just one car, such as elderly residents on a fixed income who may not need to travel much.

"The question for us is: What is real?" House Speaker James A. Amann, D-Milford, told the Connecticut Council of Small Towns last week at the Crowne Plaza Hotel in Cromwell. "Is it a shell game?"

Democrats don't want to find out after potentially supporting the repeal that a larger section of middle-class taxpayers than they suspected lost ground, Amann said. If the plan is relatively comprehensive, "I assure you we will embrace it. If it is not, I assure you we will get rid of it and come up with something better."

Senate Minority Leader Louis C. DeLuca, R-Woodbury, defended the governor's proposal last week, saying that no tax cut plan usually provides equal relief to every group.
"As with any proposal, it doesn't affect everyone exactly the same," DeLuca said. "I think it affects a lot of people differently, but I think it affects the vast majority positively. And I think the people recognize a tax cut when they see one."

Everyone has views on tax reform
By Doug Dalena, Stamford ADVOCATE Staff Writer
Published November 29 2005


STAMFORD -- Eliminate the car tax. Defer senior citizens' property taxes until they sell. Tax land at a higher rate than the buildings on it. Increase the income tax and set it aside for education. Let towns keep the sales tax charged within their borders. Cut spending.

State legislators heard those ideas and others last night, as they solicited input from local officials and a few residents about how to reform the state's tax code.  The General Assembly's Joint Legislative Program Review and Investigations committee held the public hearing at the Government Center as part of an ongoing study of Connecticut's tax system.  The committee will hold similar hearings tonight, tomorrow and Thursday in Danbury, Hamden and Groton. Before last night, it had held a hearing in Hartford.

The committee, which includes state Rep. John Hetherington, R-New Canaan, was seeking feedback on a 144-page report its staff produced last month.

Among the preliminary findings, the report said low- and middle-income residents pay a higher percentage of their income in taxes than wealthier residents, the state does not fully fund grants to municipalities such as education aid, and that corporate taxes are "complex and prone to avoidance."  Government gets more revenue from local property taxes -- nearly 40 percent -- than any other source, according to the report. That, combined with the high cost of education falling more on municipalities than on the state, provoked the most comments and suggestions last night.

Wyn Achenbaum, a Stamford activist whose Web site -- http://www.wealthandwant.com -- advocates major changes in the property tax system, told the committee the legislature should tax land at a much higher rate than the buildings on it.  That would encourage construction in urban areas, she said, because it would make the overall building costs cheaper and keep building owners from letting property deteriorate to avoid taxes.

"We shouldn't penalize the guy with the big building on it, and reward the guy with the parking lot," she said.  Such a system has worked well in Harrisburg and other cities in Pennsylvania, Achenbaum said.

"They've got a much more vibrant downtown that they ever had before," she said.  Achenbaum also advocated deferring property taxes for senior citizens, who because of their high property wealth and low income are often hit hardest by annual tax bills, until the property is sold.  The Stamford Board of Finance is considering this idea.

Former Norwalk Mayor Alex Knopp told the committee one way to help cities pay for higher education costs is to let them keep a portion of the sales tax generated in their cities.  Knopp, who left office last Tuesday after losing to Mayor Richard Moccia on Nov. 8, said cities that attract the most commuters could then recoup sales taxes paid during the workday.

Sam Romeo, former Democratic Town Committee chairman in Greenwich, said the cost of commuters should be borne by the companies that employ them.  Romeo told legislators they should explore selling naming rights to corporations to fund acquisition and maintenance of rail cars and stations for Metro-North Railroad.

"I would say to UBS, 'Let's have the UBS car,' " Romeo said. ". . . They spend millions on ads. Instead they can buy a train that's constantly going year round."  Romeo was the first speaker, but not the last, to tell the panel to study spending cuts as thoroughly as it is studying tax collection.

Lisa Cuscuna, a Stamford artist, agreed, but she also said the property tax system isn't working.

"Everyone here is upset by it," she said.

Reforming the property tax system goes hand in hand with finding another way to finance government services, said the committee co-chairman, state Rep. Brendan Sharkey, D-Hamden.  Comparing changes in the tax burden to the "whack-a-mole" game at a carnival, he said reducing one burden inevitably means "another one pops up somewhere else."

Still, many agreed that the property taxes fall too heavily on local municipalities and people with limited ability to pay.  That standard -- the ability to pay -- has been a standard of fair taxation since Biblical times, but the property tax doesn't meet it, said Martin Levine, a Stamford school board member.

"It's setting one group of people in the community against each other," he said.

Joyce Sun, a management analyst in Stamford's tax office, said although most people focus on real estate taxes, eliminating car taxes would encourage people to register their cars in the correct town and free tax collectors to pursue bigger fish.

"For 8 percent of the revenue, we spend 70 percent of the effort," Sun said.


N.J. Governor Ends Weeklong Gov't Shutdown
CT POST
By TOM HESTER Jr., Associated Press Writer
Jul 8, 8:13 AM EDT

TRENTON, N.J. (AP) -- Gov. Jon S. Corzine issued an executive order early Saturday that ended a weeklong state government shutdown, bringing slot machine bells noisily to life as Atlantic City casinos reopened.  The governor acted minutes after lawmakers approved a $30.9 billion state budget that increases the state sales tax, ending the stalemate.

"I now feel comfortable we can begin the orderly restoring of the business of government," Corzine said.

The 12 casinos, which closed Wednesday, got permission to resume business at 7 a.m. On Monday, 45,000 furloughed state workers could return to work, although exact plans were not immediately announced. State parks would reopen and lottery sales would resume.
 
The Senate voted 23-17 to approve the budget at 4:20 a.m. The Assembly followed suit at 5:40 a.m., by a 44-35 vote.
Corzine said he hoped to sign the budget later Saturday, although he wanted to take some time to review it.

"We're going to do a thorough and professional job - as good as anyone can possibly do operating on three hours sleep three nights in a row," he said.  The governor's executive order and the reopening of casinos led gamblers to their places just after 7:30 a.m. in a mostly empty slots parlor at the Borgata Hotel Casino & Spa in Atlantic City.

"If he hadn't signed it, we'd have left this morning," said Vivian Zearfaus, 62, of Southampton, N.J., feeding a slot machine a $20 bill.

The budget crisis began when Democrats who control the state Assembly balked at the Democratic governor's proposal to increase the sales tax. The impasse caused the Legislature to miss a July 1 constitutional deadline for passing a new budget. With no authority to spend money, Corzine ordered nonessential government services suspended.

The budget reflects a compromise reached Thursday between Corzine and legislative leaders that will increase the state sales tax from 6 percent to 7 percent and set aside half the proceeds for property tax relief.

"With the budget crisis finally behind us, it is imperative that we move quickly to address the number-one concern of residents: New Jersey's highest-in-the-nation property taxes," Assembly Speaker Joseph Roberts Jr. said.

The tax increase would raise $1.1 billion. Corzine had wanted all the money to go toward helping close a $4.5 billion budget deficit and help ease future budget woes.  The increase is expected to cost the average New Jersey family $275 per year, according to fiscal experts.

In all, the budget plan contains about $1.8 billion in tax increases. About $300 million in special projects were added late Friday by Democrat legislators, including many that would help municipalities and organizations represented by Democratic leaders.

That, as well as the failure to get a budget passed by the deadline, drew the scorn of Republican lawmakers.  Assemblyman Joseph Malone, R-Burlington, called the budget standoff and final product an "insult to the intelligence of residents in the state of New Jersey."

The casino closings, the first in the 28-year history of legal gambling in New Jersey, occurred because the gambling halls require state inspectors on the scene to operate.
N.J. Gov. Calls Shutdown 'Deplorable'
DAY
By JOHN CURRAN, Associated Press Writer
Jul 5, 11:02 AM EDT
 
ATLANTIC CITY, N.J. (AP) -- New Jersey's casinos ushered the last of the gamblers away from slot machines and tables Wednesday, and janitors locked the doors behind them as a state government shutdown claimed its latest victims.

In the first mass closure in the 28-year history of Atlantic City's legalized gambling trade, all 12 casinos were dark.

Gov. Jon S. Corzine addressed the Legislature at the Statehouse Wednesday morning, defending his position as a stalemate over the state budget entered its fifth day with no deal in sight. Corzine wants to raise the state sale tax from 6 percent to 7 percent to close a $4.5 billion state budget gap; lawmakers oppose the tax increase, estimated to cost the average New Jersey family $275 per year.

When the Legislature missed its July 1 deadline to pass a state budget because of the dispute, Corzine ordered the government shut down.
 
"It is deplorable that the people of this state are left in such a painful position," Corzine told the Legislature Wednesday. "The people of New Jersey have every right to be angry."

The closure of the Atlantic City casinos is a particularly hard hit. They have a $1.1 billion payroll, and the state takes an 8 percent cut - an estimated $1.3 million a day.
But with no state budget, New Jersey can't pay its state employees, meaning the casino inspectors who keep tabs on the money and whose presence is required at casinos are off the job and the casinos can't operate.

Fewer than half of the state's employees, about 36,000 in vital roles such as child welfare, state police and mental hospitals, remained on the job, and they were working without pay.

The doors to the Boardwalk side of Caesar's were locked by janitors. An announcement came over the public address system telling gamblers the casino was closing. Doors directly to the Trump Plaza Hotel casino also were locked. At other locations, access was open to hotel-casinos, but gaming floors were roped off, with guards standing nearby.

"It's like last call at a bar. It's a little bit eerie," said Michael Trager, 36, of Cincinnati, who was playing a video poker machine at 10 minutes to 8 a.m. when an attendant told him to conclude his bet. "They said, 'That's it, you gotta cash out. We're closing.'"

At Bally's Wild Wild West casino, a sign at the entrance read: "We apologize for the inconvenience. We will resume casino operations as soon as a NJ state budget resolution is reached."

"I can't understand how they can't find a solution to the budget," said Frank Cannatella, 65, of Staten Island, N.Y., an overnight guest at Trump Plaza.  Assembly Democrats worked through the night on a new budget proposal that could be introduced Wednesday, but the governor, without being specific, dismissed alternatives. He called them "a patchwork quilt of unknown, untested and unvetted ideas that we hope will once again simply get us to the finish line."

Atlantic City police spokesman Lt. Michael Tullio said it was quiet Wednesday morning in town after the shutdown.

Up to 15,000 casino employees are out of work because of the closings, and that number could double if the casinos remain closed through the weekend, according to Robert McDevitt, president of Local 54 of UNITE HERE, a labor union that represents rank-and-file casino hotel workers.  The gamblers were well aware of the loss for the city.

"They're going to lose a lot of money," said Jerome Harper, 42, of Philadelphia, who was playing the slots at Resorts Atlantic City. "It's bad. Why close it down when you could just do your job and put the budget together? That's what they're paid for."

Ruth Dodies, 77, of Philadelphia, stood at the entrance of the Trump Plaza Casino, simply staring at it.

"I never thought this would happen," she said.


N.J. lawmakers ignore governor's plan
Norwalk HOUR
Associated Press
July 5, 2006

TRENTON, N.J. — Legislators opposed to Gov. Jon S. Corzine's proposal to raise the sales tax rejected a compromise sought by the governor Tuesday and began devising their own budget plan, which might involve an income tax increase.  Corzine had hauled lawmakers in to work on the July Fourth holiday, imploring them to end a budget standoff that has shut down many government services, while Atlantic City casinos fought to keep from being dragged into the dispute.

Members of the state Assembly budget panel planned to spend the night crafting a new plan, said Speaker Joseph Roberts Jr.  Tuesday's special session came three days after Corzine started shutting down state government because lawmakers missed the July 1 constitutional deadline to approve a new budget. Without a budget, the government can't spend money.

"Make no mistake, people are being hurt and unfortunately more will be hurt in the days ahead," the governor told the lawmakers.  The state lottery, road construction, motor vehicle offices, vehicle inspection stations and courts already have closed.

More than half the state work force — 45,000 people — was ordered to stay home on Monday. Lost lottery ticket sales are costing the state $2.2 million per day, according to the state treasury.  If no deal is reached, state parks and historic sites would be closed Wednesday along with Atlantic City casinos, which are required to have state regulators on duty.

It would be the first time casinos have been forced to close since Resorts opened its doors in 1978 as New Jersey's first casino-hotel. In the intervening years, they have always managed to keep the doors open, even if it meant shoveling snow, fortifying entrances with sand bags to protect against ocean waves or putting CEOs to work flipping burgers during labor strikes.

Casino operators, whose arguments were rejected by the state Supreme Court in one effort to avoid the budget crunch, lost in a lower court again Tuesday after asking to avoid being shut down as a side effect of the state's problems. An appeal was planned.

"It's uncharted territory," said Joseph Corbo, president of the Casino Association of New Jersey. "We'll obviously try to control it as best we can under the circumstances."

Roberts said he asked Corzine to avoid a casino shutdown by declaring state regulators "essential" employees, or by allowing state police to monitor gambling.  But the governor's emergency powers don't allow him to deem casino workers essential to the health, safety and welfare of state residents, said Stuart Rabner, Corzine's chief counsel.  Some gamblers said they didn't understand why the state would close the casinos during a budget crisis when gambling provides so much in-state revenue — $1.3 million per day, according to the state Casino Control Commission.

"Why close it down when you could just do your job and put the budget together. That's what they're paid for," slots player Jerome Harper, 42, of Philadelphia, said Tuesday of state officials.

The dispute between the governor and his fellow Democrats who control the Legislature centers on his plan to increase the state sales tax from 6 percent to 7 percent to help overcome a $4.5 billion budget deficit for his $31 billion spending plan. The proposal would cost the average New Jersey family $275 per year, according to experts.

Corzine had urged the lawmakers to approve a compromise plan rejected Tuesday. Offered by Senate President Richard J. Codey, it would have used half the $1.1 billion raised by his sales tax increase to ease the state's property taxes, among the nation's highest.  Only 15 of 49 Democrats in the state Assembly supported the compromise, Robert said.

Assemblyman Jeff Van Drew said a new plan may involve a proposal to increase the income tax for those earning at least $200,000 per year. In the past, Corzine has rejected proposals to increase the income tax.

N.J. Gov. Tells Lawmakers to Compromise
DAY
By TOM HESTER Jr., Associated Press Writer
Jul 4, 11:05 AM EDT 

TRENTON, N.J. (AP) -- Gov. Jon S. Corzine urged lawmakers Tuesday to compromise on his plan to increase the state's sales tax and approve a budget, which would end the government shutdown that threatens to extend to casinos and state parks on Wednesday.

"Make no mistake, people are being hurt and unfortunately more will be hurt in the days ahead," the governor told lawmakers during an unprecedented Fourth of July special session.

The session came three days after Corzine started shutting down state government because lawmakers missed the July 1 constitutional deadline to approve a new budget. Without a budget, the government can't spend money.

"All of us surely believe this circumstance must end," said Corzine, a first-term governor and former U.S. senator and Wall Street executive.

Legislative leaders, speaking after Corzine's address, said his speech wasn't likely to resolve the stalemate right away. If no deal is reached, state parks and historic sites would close Wednesday along with Atlantic City casinos, which are required to have state regulators on duty.  The state lottery, road construction, motor vehicle offices, vehicle inspection stations and courts have already closed. More than half the state work force - 45,000 people - was ordered to stay home on Monday.

The dispute between the governor and his fellow Democrats who control the Legislature centers on his plan to increase the state sales tax from 6 percent to 7 percent to help overcome a $4.5 billion budget deficit for his $31 billion spending plan. The proposal would cost the average New Jersey family $275 per year, according to experts.

"No one is seeking to increase taxes because they want to," the governor said during his speech, as he detailed years of mismanagement of the state's revenues.
   
Corzine urged the lawmakers to approve a compromise offered by Senate President Richard J. Codey that would use half the $1.1 billion raised by his sales tax increase to ease the state's property taxes, among the nation's highest.

"I'm willing to meet the Legislature half way," Corzine told lawmakers.  He said the Legislature should keep working until a spending plan is approved. "We must stay here until we meet our constitutional obligations," he said.  After the governor's speech, Codey said he wasn't optimistic Corzine and the leader of the tax hike opposition, Assembly Speaker Joseph Roberts Jr., would come together.

"I don't see where either one is anyway going to change their position at this particular point in time," Codey said.

"I think we're as divided today as we were before the speech," said Assembly Joseph Cryan, chairman of the state Democratic Party and a Corzine budget plan supporter.

State regulators have ordered the casinos to close at 8 a.m. Wednesday.

"When they shut down, then there's no tourists, no conventions, no money for the workers. That's not good," said Ann Ji, who runs a beauty supplies store one block from the casino strip.
Atlantic City casinos next N.J. casualty
Norwalk HOUR
Associated Press
July 3, 2006
 
TRENTON, N.J. — Atlantic City's casinos were ordered to close Wednesday, the latest casualty of a state government shutdown that began after the Legislature failed to adopt a budget by its July 1 deadline.

The head of the Casino Control Commission ordered gaming in Atlantic City to cease at 8 a.m. Wednesday — the day after the July Fourth holiday — if New Jersey fails to enact a budget by then.

Atlantic City's 12 casinos, which require state monitoring, have waged a court battle to remain open, and an appeals court was weighing the matter Sunday. There was no word on when a ruling would be made, courts spokeswoman Winnie Comfort said.

Gov. Jon S. Corzine said Sunday there was "no immediate prospect of a budget." State parks, beaches and historic sites also were expected to shut down Wednesday.  If the casinos shut down, the state would lose an estimated $2 million in tax revenue each day they stayed closed. Republican Assemblyman Francis Blee, whose district includes the casinos, said it was important for them to remain open.

"We will have tens of thousands of individuals, real people, that are going to be hurt by this," he said. "There will be bread-winners who are not bringing home a paycheck."

Corzine shut down nonessential government services Saturday after the Legislature failed to adopt a budget by its July 1 deadline, leaving the state without the means to spend money. Budget talks became heated this year as Corzine, a Democrat, proposed increasing the state sales tax from 6 percent to 7 percent to help overcome a $4.5 billion budget deficit.

Most Democrats in the Assembly and several Senate Democrats oppose the sales tax increase, fearing voter backlash and reserving any tax increase for property tax reform. Assembly Democrats proposed a series of alternatives, some of which Corzine accepted, but both sides remained $1 billion apart as the budget deadline passed.

About 45,000 state employees were furloughed Saturday. Corzine's order allows him to keep 36,000 state employees working without pay. Services such as state police, prisons, mental hospitals and child welfare were to keep operating.

The lottery and road construction projects were among the first to close. A state appellate panel on Sunday ordered horse tracks closed at the end of business Tuesday. The horse racing industry said it would file further appeals to keep harness and thoroughbred tracks open past July 4 if the budget impasse is not resolved.

Corzine met in private with top Assembly and Senate leaders for nearly four hours Sunday but no compromise was reached.  The Senate is scheduled to meet on Monday, and Senate President Richard J. Codey has told senators to be ready to stay in session until a budget is adopted.

"Let's get on with getting this problem solved," Corzine said while touring a state police dispatch center in Hamilton on Sunday, emphasizing he couldn't "sign a bill that doesn't exist."

Republicans, the minority party in both the Assembly and Senate, have expressed frustration.

"I'm appalled that this reached this stage," said Senate Minority Leader Leonard Lance, R-Hunterdon. "It is very unfortunate that the Democratic governor and Democratic majorities in the Legislature could not achieve a budget in place by June 30, and now all the people of New Jersey suffer as a result."

Some lottery sellers — and many customers — were surprised to learn that the games were being put on hold until the budget impasse is resolved.

"People will be angry, but we can't do anything about it," said Umesh Patel, 40, owner of Deli Delight in Ewing. "I don't know how long it's going to be, so let's just see what happens next."
 
State tax policies get higher ranking
CT POST editoial
Article Launched:10/14/2006 07:29:15 AM EDT

Connecticut is making progress on its tax policies when they are compared to other states, according to a new national study. The state is no longer ranked in the top 10 worst states for tax policies, according to an annual review by the Tax Foundation of Washington. In fact, Connecticut has moved up to 37th in a ranking of the 50 states.

But it's also a sort of backhanded achievement, according to foundation officials, although we don't necessarily share that sentiment. Tax Foundation economists say that Connecticut's improved ranking is due more to other states making poorer tax policy choices.

Foundation officials say Connecticut's tax structure really hasn't changed much.

We beg to differ. In fact, we think the state's ranking will continue to improve because this year's General Assembly took actions to lower taxes on businesses in upcoming years to spur job growth.  Those actions include agreement to end the surcharge on the corporate income tax and to repeal the personal property tax on manufacturing equipment.

Where we do agree with the Tax Foundation study, however, is that a negative for Connecticut continues to be its heavy reliance on personal property taxes.

Certainly, in this region in recent years, we've all witnessed the increasing contentiousness among citizens as they struggle with municipal budgets largely dependent on local property taxes.

It must be a primary topic for our gubernatorial candidates this election and it's encouraging that both Gov. M. Jodi Rell and New Haven Mayor John DeStefano, her challenger, touched on the issue in their first debate.

Rell again trotted out her plan to abolish local property taxes on motor vehicles, a proposal which found favor in these columns earlier this year. DeStefano has proposed reforms that would link more state aid to education (and higher income taxes on the wealthier) in an attempt to decrease local real estate taxes.

Both proposals head in the right direction, but must be further expanded. By that we mean that Rell's proposal doesn't really tackle property tax reform while DeStefano's plan is overshadowed by all the extra spending he envisions if he were elected governor.

The answer resides somewhere in the middle of both proposals and that's what should be explored in the campaign's remaining weeks
Property tax hurts state's ranking
By ROB VARNON rvarnon@ctpost.com
Article Launched:10/12/2006 07:13:03 AM EDT

Connecticut no longer ranks among the 10 states with the worst tax policies in the nation, according to a new study by The Tax Foundation of Washington.
Joseph McGee, a vice president of The Business Council of Fairfield County, said the foundation's report seems to reflect the truth about Connecticut's tax climate: "We're middle of the pack."

The study released Wednesday ranked Connecticut 37 out of the 50 states for providing a positive tax climate for business. In 2006, Connecticut ranked 41st for its tax policies, according to the foundation.

Curtis Dubay, a Tax Foundation economist, said the study is not about tax burden, but about how states derive revenue. In a nutshell, Dubay said, the foundation is looking at whether the system is fair.

In Connecticut's case, the state did well on measures of individual income tax and unemployment insurance tax, ranking among the best 20 states for both categories, according to the report.

Dubay, who grew up in Ellington and earned his master's degree in economics from the University of Connecticut, said the state's improvement was most likely due to poor policies implemented in other states. The foundation, he added, didn't see much change in Connecticut.  There are a couple of red flags denoting a poor tax system, Dubay said, including when governments offer tax incentives to keep or lure businesses into the state.

A tax strategy like this is shortsighted, according to Dubay, because the tax breaks usually go to large corporations, which shifts more of the tax burden onto smaller businesses. That encourages smaller companies to leave the state, he said. It's not fair, either, he said, and raises the question of why one company should get a tax break and not another, which puts the government in the position of picking winners and losers.

Another flawed strategy is to raise taxes on businesses to cover funding gaps.

"Businesses don't pay taxes, people pay taxes," Dubay said; companies will just pass the added tax costs onto customers or cut jobs or benefits.

The state's heavy reliance on the property tax had the biggest negative impact on Connecticut's overall ranking, according to the foundation. Connecticut had the second-worst property tax ranking in the nation behind Rhode Island, which had the worst overall tax policies in the nation.

Overall, New York, New Jersey, Vermont and Maine were among the 10 worst states, the report said. New Hampshire was the only Northeastern state to rank among the top 10; Massachusetts ranked just ahead of Connecticut at 36.

But Peter M. Gioia, a Connecticut Business & Industry Association economist and vice president, said he is more concerned with health care costs than taxes.

Most businesses rank rising health care costs as their primary concern these days, Gioia said, largely because there has been some improvement on the tax front. For example, in the most recent session, the Legislature agreed to end the surcharge on the corporate income tax and repeal the personal property tax on manufacturing equipment, Gioia said.

McGee agreed with Gioia and said the state has to improve its transportation infrastructure and the education system in its major cities. He said the taxation issue has been overblown.

"It's a red herring," McGee said. "Essentially, it's such a small cost of overall expenses."


NEITHER A BORROWER NOR A LENDER BE
A tactful cutline is hard to come up with here...Congressman Randel of NYC above. LWVUS last issue of the "National Voter" included an article about tax rates.


Raising taxes on rich unlikely to cut deficit
Washington Times
Patrice Hill
Thursday, April 15, 2010

Taxing wealthier people is back in style with Democrats in the White House and running Congress, but the government's fiscal house is in such disarray that even that well-trodden path will prove to be no cure-all for the nation's soaring $1 trillion budget deficits.

Estimates by nonpartisan groups such as the Urban Institute and Tax Policy Center show that without any serious efforts to cut spending, tax rates on the wealthiest people earning $200,000 or more — the group targeted by President Obama — would have to rise to prohibitive levels of between 77 percent and 91 percent just to bring the yearly budget deficit down to manageable levels of around 2 percent to 3 percent of economic output.

Despite those estimates, the trend toward raising taxes on higher-income earners is well under way. Mr. Obama's health care reform program nearly doubled the Medicare tax on people earning more than $200,000 and subjected their investment income to the health care tax for the first time.

The health program adds to what is already a steeply progressive tax code by using the upper-income tax revenues to subsidize health care for people with incomes under $50,000 — the same group that currently pays little if any federal income taxes.

In fact, thanks in part to Mr. Obama's "making work pay" tax credit enacted last year, only about 3 percent of families with incomes under $50,000 will pay any federal income taxes this year, although most of those will continue to pay Social Security payroll taxes, according to estimates by Deloitte Tax and the Tax Policy Center.

Meanwhile, Mr. Obama's budget proposes letting the tax rate on people with incomes of more than $200,000 revert to Clinton-era levels between 36 percent and 39.6 percent at the end of the year when President George W. Bush's tax cuts expire. And a myriad of proposals have emerged in Congress to further tax the same group to pay for everything from education to clean energy.

With taxes due Thursday, these statistics are enough to "make your blood boil" if you're in the top 53 percent, said Ned Brines, analyst at the Seeking Alpha market research Web site. "Id say 'the rich' are certainly paying their fair share."

The nearly half of U.S. citizens who paid no federal income taxes last year is up from around 40 percent of non-payers just five years ago, suggesting that the long-standing trend toward tilting taxes toward the rich is gathering speed, he said.

"At this rate of increase, by 2012 the majority of voters won't be taxpayers," yet many of them will be getting benefits from the government, Mr. Brines said.

As seen in the recent health care debate, tax increases on higher-income groups usually are justified as a matter of equity and justice, with the revenues funneled into benefits for people with lower incomes to buy health insurance, feed and shelter their families, among other worthy causes. Given that history, to assume that any future tax increases will be devoted to reducing the deficit could be a stretch.

Nevertheless, the debt crisis erupting in Europe among countries with heavy debts like the U.S. is putting pressure on Washington to do something about the deficit. Moreover, Congress will be confronted with a mandate to address the deficit this fall when a presidential commission charged with recommending ways to reduce the debt will report its findings — auspiciously just as most of Mr. Bush's tax cuts are expiring.

The commission is widely expected to find that the only alternative to major tax increases will be drastic curbs in spending on popular spending programs like defense, Social Security, Medicare and Medicaid. And much of the biggest potential savings in Medicare already have been used to help finance Mr. Obama's expansion of health care.

Without any serious move to curb spending in such programs, Congress would have to broadly raise taxes to reach Mr. Obama's goal of bringing budget deficits down to 3 percent of the gross domestic product by 2020 — the minimum effort economists say is needed to avoid financial instability and a debt crisis in the future.

According to the Urban Institute, taxes would have to rise by about one third for everyone who pays taxes — a scenario that would raise the top tax rate to 48 percent. But if taxes are raised only on the two highest income brackets, the top tax rate would have to rise to nearly 77 percent. And if a more ambitious goal were adopted to reduce the deficit to 2 percent of economic output, the top tax rate would have to rise to 91 percent, the institute estimates.

David Greenlaw, economist with Morgan Stanley in New York, said that those figures show the daunting challenge facing Congress.

"Eighty-five percent of the current budget consists of defense, entitlements and interest on the debt — implying that it is very difficult to achieve meaningful deficit reduction on the spending side alone," he said. "Similarly, it's difficult to make significant progress by tinkering with tax rates on upper-income individuals."

Raising taxes to prohibitive levels would set off a cottage industry for tax shelters and tax loopholes that would enable rich people to avoid paying such high taxes, he said.

Since either huge spending cuts or soaring tax rates would create both political and economic problems, it is little surprise that some experts like former Federal Reserve Chairman Paul A. Volcker, an Obama administration economic adviser, are suggesting a value-added tax — a kind of federal sales tax — as an alternative, he said.

Kim Whalen, economist at Wells Fargo Securities, said there is little alternative to reining in the government's massive retirement-benefits programs, even though such a move will become even harder politically as more and more baby boomers retire in coming years.

"Supporting them in their current form is one option, but the increased taxes and/or reduced spending in education, defense and other areas will be the extremely high cost," she said.

How 'soaking the rich' clobbers you
NYPOST
By NICOLE GELINAS
Last Updated: 5:57 AM, April 14, 2010
Posted: 1:19 AM, April 14, 2010

Nearly half of American tax filers didn't have to pay any federal income tax last year. But Americans -- especially New Yorkers -- shouldn't enjoy the free ride. Soon enough, everybody will pay for the higher spending that Washington's "generosity" encourages. And thanks to Washington, we'll be paying for higher state and local spending at the same time, too.

Just a decade ago, two-thirds of American tax filers still paid into the tax system. But both Democrats and Republicans have spent the last quarter-century inventing and expanding all kinds of voter-friendly tax breaks. Easy-to-use tax software has helped people get every dollar -- something that was once less common, because it simply wasn't worth the bother.

Just a few examples: The earned-income tax credit now gives working-class families up to $5,700 a year. Other tax breaks benefit middle-income people with kids and mortgages.

And this year, thanks to President Obama, we've got a temporary $8,000 credit for people who buy a house, as well as an $800 credit for couples with jobs. A Deloitte Tax analysis found that "a family of four making as much as $50,000 will owe no federal income tax for 2009," the AP reported last week.

New York mirrors the rest of the country. Nearly 42 percent of New York City filers won't owe federal taxes for 2009, and state and city tax breaks mean that more than a third of these filers didn't pay state or city income taxes, either, according to an estimate by the city's Independent Budget Office.

Using taxes to help people get ahead is OK -- up to a point.

But everyone should have to pay something -- and anyone who earns enough to have cable TV can pay something toward their own national defense, too.

A big majority of people, in fact, should pay enough to be annoyed on April 15 rather than excited. Otherwise, the politicians will figure they can just keep spending without angering a critical mass of voters.

As it is, Washington just figures that when it comes time for tax hikes to pay for all the spending we're doing with borrowed money, the "rich" will pay.

Case in point: President Obama seems certain to let the Bush tax cuts for upper-income Americans expire -- so in January the top rate will jump back to 39.6 from 35 percent. Two years later, a new 3.8 percent tax kicks in on investment income earned by families who make $250,000 and up (part of the health-care bill).

Thing is, the rich already do pay. And when it comes time to pay for all of the spending we're doing now, the rich may not be able or willing to pay even more.

Taxpayers earning over $200,000 paid more than 54 percent of federal income taxes in 2007, way more than the 32 percent of the nation's income they earned. In New York, the rich pay even more. Families above the $200,000 mark pay nearly 67 percent of the Empire State's share of federal income taxes.

It's the same with our state and local taxes. Mayor Bloomberg regularly notes that 40,000 families making a half-million or more pay nearly half the city's income taxes, and these same people pay a similarly outsized share of state taxes.

And there's a limit to how much the government can get. Last year, New York hiked income taxes on people who earn more than $200,000. But, as E.J. McMahon of the Empire Center for New York State Policy noted last month, the expected take from that tax hike seems likely to come in half a billion below estimates.

There's good reason to think Obama's tax hikes on the rich will fall short, too. No, federal taxpayers can't leave the country as easily as a handful of Bloomberg's Upper East Side neighbors can leave New York -- but they can park more money in tax-free investments or simply decline to earn it in the first place. Such tax-avoidance is perfectly legal -- but it means less economic growth, and thus less income earned by everyone else.

The longer we wait to learn this lesson, the more painful it will be -- especially here at home.

Consider: In the short term, hiking taxes on the rich perversely allows New York to get away with yet more spending -- because the state can borrow more cheaply to do it. How's that? As tax rates rise on profits from stocks and private-sector bonds, wealthy taxpayers will put more money into tax-exempt debt, including . . . New York's own government bonds.

Thus, Obama's tax hikes will actively discourage putting money in private investment markets, helping to heal the economy -- and encourage investors to pump more money into bloated state and local governments.

The cycle of higher taxes on the rich to fund higher spending will continue -- until the rich are just exhausted. That day is coming -- and then we'll all get higher taxes. That's why we're hearing talk of a "value added tax" on consumption, which hits middle- and lower-class folks hardest.

People who theoretically have no skin in the game, then, should worry hard about "taxing the rich."

Tax hikes forever
New York Post
By RICH LOWRY
Last Updated: 4:20 AM, April 13, 2010
Posted: 1:26 AM, April 13, 2010

Nearly everyone understands that his taxes just went up.

President Obama won't admit it, although he must suffer from a guilty conscience. He uncorked a defensive 17-minute-long answer in response to a question at a town-hall meeting about new taxes in the health-care bill, complaining about a lot of misinformation" without citing any.

In his cascade of words, Obama didn't get around to mentioning the $500 billion in new taxes during the first 10 years of the health bill. And they're merely a prelude.

It doesn't take an economist to understand what public debt at Greece-like levels of 90 percent of GDP by 2020 inevitably portends. Nor to realize the effects of the yawning disconnect between federal spending at 24 percent of GDP and revenue at 19 percent of GDP. Nor to understand the most basic of all budgetary concepts -- that the bill, after the fizzy party, after all the huzzahs over "making history," always comes due, and with interest.

This is why the country has a roiling tax revolt prior to the imposition of any significant tax increases. The tea-party movement is an act of pre-emption, based on the simple calculation that higher spending eventually means higher taxes. For all the tsk-tsking about its supposed irresponsibility, the movement is attuned to the future in a way that the president -- who hopes to evade or hide the consequences of his budgetary choices for as long as possible -- is not.

Obama has always been happy to boast that he'll let the Bush tax cuts on high-end earners expire at the end of this year. This blow for justice will initially generate all of about $40 billion annually, or only about 5 percent of the cost of Obama's stimulus bill. Over 10 years, it will raise almost $700 billion, or only enough to cover about half of the budget deficit this year alone.

Obama will need more, and he's not going to get it all from "the rich." The left's image of the US tax code as a predatory tool of the wealthy is a Michael Moore fantasy. The Organization for Economic Cooperation and Development evaluated the household taxes -- income taxes, plus Social Security levies -- of developed countries in 2008. It found that the United States "has the most progressive tax system and collects the largest share of taxes from the richest 10 percent of the population."

The Associated Press reported last week that 47 percent of US households don't pay federal income taxes at all. Either their incomes are too low, or their liability is wiped out by sundry credits, deductions and exemptions.

"The result," the AP writes, "is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners -- households making an average of $366,400 in 2006 -- paid about 73 percent of the income taxes collected by the federal government."

To borrow Obama's phrase from the 2008 campaign, the federal budget already "spreads the wealth around," thank you very much. A Tax Foundation study finds that "the bottom 60 percent of American families will as a group receive more in government spending than they pay in taxes."

No wonder Obama now calls himself "agnostic" on his 2008 blood oath not to raise taxes on households making less than $250,000 (already violated at the margins) and his advisers float a European-style value-added tax, a broad-based tax on consumption. He'll have to go where the rest of the money is.

"I like to pay taxes," Oliver Wendell Holmes famously said. "With them I buy civilization." With ours, we will buy a misbegotten stimulus program, bailouts, runaway entitlements, a costly new health-care program and a federal government where incontinence is a perpetual pre-existing condition. No matter what your tax bill this year, don't worry -- it'll go higher.

ESTATE TAX: Disappearing Federal Estate Tax Could Be A Mirage
By MARA LEE, The Hartford Courant
January 11, 2010

For the first time since 1916, wealthy people who die can leave an unlimited amount to their children or grandchildren without the IRS's taking its piece.

The 2010 hiatus from the federal tax — a quirk that no one ever expected would happen — could last all year, if Congress doesn't act on it. Or, the temporary death of the "death" tax could be a mirage, if lawmakers slap a levy on estates retroactive to Jan. 1 of this year.

The outcome is anyone's guess. For now, the federal estate tax — scheduled to return at a high level in 2011 — is a confusing morass affecting thousands of families with multimillion-dollar estates.

It also stands at the heart of a broader debate about how government should raise money. That's nowhere sharper than in Connecticut, the nation's richest state, with many families with fortunes to protect, but also among the most liberal, with wealthy residents who say the tax is fair.

In 2009 and into this year, the state's estate tax has been a political football in the contest over how to balance an out-of-whack budget.

But what's happened to the federal tax has taken political gridlock to new heights.

"No one would argue it's best to go from 45 percent to zero to 55 percent, and yet that's what we're doing," said Ben Harris, a senior researcher at the Brookings Institution, a Washington think tank.

Death To The Tax

The federal estate tax — known as the "death tax" to its opponents — went through annual exemption increases and rate decreases for nine years as a result of the Bush tax cuts that passed in 2001. By 2009, the rate was 45 percent, kicking in at $3.5 million.

The idea behind the rising exemptions was to spare upper-middle-class families and small businesses. The old rate, above 50 percent, sounded unfair, even to those who would never have enough savings to pay the tax.

Lobbyists against the estate tax hoped that the one-year elimination would create momentum for a permanent abolition. But the Bush tax cuts only last for 10 years, so the tax will return to 55 percent, with a $1 million exemption, if Congress doesn't act.

The House of Representatives passed a bill in December that would have prevented the 2010 hiatus. But the Senate, tied up with health care legislation, never took a vote.

Morris Banks, an attorney with Pullman & Comley in Hartford, says he believes that the Senate will get around to acting in April or May, and will make the reinstatement of the estate tax retroactive. The bill under consideration would extend the 2009 levels.

But he said he sent letters to all his clients who have written wills designed to minimize their exposure to the estate tax, telling them they should consider redrafting them.

"You'd better come in and talk to us," Banks said, summing up the message.

The way those wills were written helped parents pass $7 million to heirs tax-free, but to do that, each parent's will has to set aside half that amount. Because the tax cuts changed the exemption level each year — $7 million was last year's figure — the wills don't include dollar amounts, they just say that an amount just below the estate tax threshold will pass down to kids, and the rest will go to the spouse.

If a husband died today with a will written that way — and the wife didn't have control over the money for the kids — she would get nothing.

Rarefied Tax

Kent Lawson, 65, a Sherman resident, flew to Washington in 2001 to lobby against reduction and repeal, even though he is wealthy enough that his estate will owe the tax.

"This country was not built on dynastic wealth," Lawson said. "It's antithetical to our spirit, I believe."

Lawson, who built a software company that wound down as he moved into retirement, said he looks at the issue as an economist. "The government is going to have to raise money through some mechanism," he said, and he thinks estate taxes and income taxes are fairer than property taxes.

Estate tax expert Lily Batchelder, a professor of law and public policy at New York University, said she strongly doubts that inheritances this year will avoid the estate tax. There is precedent for passing retroactive tax laws, she said.

But shortly before he announced that he will not seek re-election, Sen. Christopher Dodd said of the tax: "I don't know what will be happening, frankly."

Opponents of the estate tax say that it places a burden on family businesses and farms. They also say it's unfair that the government takes half the money that belongs to your children.

With exasperation in his voice, Dodd talked about how he knows other politicians who heard demands for a permanent estate tax repeal when they were visiting a mobile home park.

"It's down to a handful of people," he said. "But because it's been called a death tax ..."

Nationwide, 99.8 percent of deaths are untouched by the estate tax, which has never affected bequests to charity or to a spouse. In 2009, 5,500 estates paid tax, a total of $13.8 billion.

No Real Threat

Connecticut also had an estate tax change, a reduction that took effect Jan. 1. People who leave at least $2 million to children pay graduated rates between 7.2 percent and 11.4 percent up to $10.1 million inheritance; the amount above $10.1 million is subject to a 12 percent tax.

Just like under federal law, the fact that each parent can use the exemption means that couples can leave $4 million to children and grandchildren without owing taxes.

The Democrat-controlled legislature voted to delay the estate tax reduction that just took effect, but Gov. M. Jodi Rell, a Republican, vetoed the measure.

In the year ending June 30, 2009, only 293 estates in the state reached the $2 million cutoff, and the state raised a total of $165.7 million. Just 26 estates passed on more than $10 million, sending $13 million to the state.

The estate tax is often cited as a threat to small firms, but, lawyers and tax advisers say, there are many ways to pass a business to the next generation without paying any estate tax.

John Santa, whose parents founded heating oil company Santa Energy in Bridgeport in 1940, inherited the company along with his three brothers without paying a cent of estate tax.

"Our folks had passed the business to us over time," he said. Santa, who is vice chairman of the board but no longer runs the business, is doing the same for his nephews. "Ten years ago, I began our transition. It won't be complete for another four or five."

Santa advises other family businesses through the University of Connecticut Family Business Center, and said no one has ever said the estate tax was a barrier as they were figuring out how to transfer the business to the next generation.

Banks, at Pullman & Comley, said there are many small manufacturers in Connecticut worth $5 million to $10 million, and the owners of those sorts of businesses are the bulk of his estate-planning clients. He said that more than half avoid the estate tax altogether.

John Ivimey, an attorney at Reid and Riege, said that about two-thirds to three-quarters of his clients trying to minimize their estate taxes built their wealth through their earnings, investments and cash inheritances, not through a family business.

Sending gifts to children and grandchildren, paying grandchildren's college tuition and other ways of reducing estate tax liability doesn't usually "get us all the way to zero," Ivimey said.

Because there has been uncertainty about what's happening with the federal and state taxes, his clients aren't making any changes while they wait to see what happens, said Ivimey, who added that he had a lot more estate-planning clients when the limit was just $675,000 in 2001.

Artist Pat Winer had more than $675,000 in assets back then, but still lobbied Congress against reduction or repeal of the tax. "I just feel the distribution of wealth in this country has gotten so uneven. The last thing we should do is give up the estate tax, because it's one of the few leveling taxes," she said.

Winer, who lives in Bethany, doesn't have any children, but her mother's estate was subject to the tax for Winer and her sister when she died in 1965. "It would've been a lot larger," she said.

But they had no resentment of the tax. "People took it for granted."

Copyright © 2010, The Hartford Courant
Editorial: Once and Future Taxes
NYTIMES
September 4, 2009

So far, the Obama administration’s plan for dealing with the budget deficit — an estimated $9 trillion over a decade — is to not dig the hole any deeper. That’s an important first step. President Obama deserves credit for proposing ways to pay for his two big initiatives to date: health care reform and energy legislation. Reducing the growth in health care costs, in particular, is vital to curbing future deficits.

As for the hundreds of billions of dollars in economic stimulus, their impact on long-term deficits is marginal because the spending is temporary. More important, deficit spending is warranted in a recession because it eases the downturn and in so doing, averts even worse damage to the economy and the budget.

But, sooner than he may prefer, Mr. Obama will have to face up to what he has so far avoided: the need to raise taxes broadly to rein in deficits.

The deficits are not of his making. Some two-thirds of the $9 trillion shortfall resulted from policies that predate his administration; most of the rest is the cost of policies that both parties consider necessary, like continued relief from the alternative minimum tax.

But when he inherited the burden of the budget mess, Mr. Obama also inherited the responsibility to clean it up. Neither economic growth nor spending cuts will be enough to fix the projected shortfalls. Nor is there enough to be gained by confining tax increases only to families making more than $250,000 a year, a campaign promise that Mr. Obama still says he will keep.

Assuming the economy has begun to recover by 2010, next year would be the natural time to start raising taxes. That’s because the Bush-era tax cuts are set to expire at the end of 2010. If Congress does nothing, taxes will revert to higher levels for everyone; if it extends all of the cuts, taxes will stay low for everyone; if it extends some and lets others expire, taxes will stay low for some taxpayers and go up for others.

Since 2010 is also a Congressional election year, lawmakers will be reluctant to raise taxes at all, and certainly not without considerable support from the White House, which is already worried about the 2010 elections.

Under these political pressures, Congress might be tempted to extend all of the Bush cuts at least through 2011 — and that would be a dangerous move because time is not necessarily on Mr. Obama’s side.

No one is angling to raise taxes during the recession, but the longer it takes to show real progress on deficit reduction, the greater the possibility that the nation’s creditors will demand higher interest rates on loans to the Treasury. That would worsen the deficit by raising the nation’s borrowing costs. And with the recovery of both the financial system and the housing market dependent on low interest rates, an unanticipated or uncontrolled rate increase would be a crisis in its own right.

The question then is not whether taxes must go up, but when, how and how much. The White House budget director, Peter Orszag, has said the administration is working to bring the deficit down in the 2011 budget, due early next year. But when asked recently by The Wall Street Journal for details, including the possibility of higher taxes on families making less than $250,000, Mr. Orszag said that the administration was not yet giving any specifics on the next budget.

In the meantime, the tax code remains inadequate to the task of raising sufficient revenue — and high-income taxpayers are about to benefit once again. Next year, a misguided law enacted in 2006 will take effect, giving high-income taxpayers the chance to shelter much of their money from future tax increases.

The law will let high-income taxpayers transfer traditional individual retirement accounts into so-called Roth I.R.A.’s. Unlike regular I.R.A.’s., no tax is due when money is withdrawn from a Roth. That often makes Roths a better deal, especially if you believe that tax rates will be higher in the years to come — and they are bound to be higher. Taxpayers who switch to Roths will have to pay tax upfront on the amounts they transfer, so the government will get a jolt of revenue. But later, the transfers will be a money loser for the government as high-income Americans and their heirs make tax-free withdrawals that would have been taxable at tomorrow’s higher rates.

The Obama administration may not want to talk about the need for broad tax increases while other issues dominate the agenda. But if the administration and Congress do not act rationally and in a timely way, they risk being forced to act by circumstances beyond their control. In that event, the economic harm to Americans would be far greater than simply acknowledging the obvious and acting accordingly.
Bad time to be rich? Only if you don't like taxes
CT POST
By STEPHEN OHLEMACHER Associated Press Writer
Updated: 07/19/2009 09:00:16 AM EDT

WASHINGTON—It's probably never a bad time to be rich. But the good times for America's wealthy could soon be a little less so.

President Barack Obama wants to boost income taxes for the wealthy to pay for tax cuts for everybody else. He wants to limit the deductions that high-income families take for mortgage interest and charity contributions to help pay for providing more people with health insurance.

House Democrats are planning to hit the wealthy with even higher income taxes to pay for their version of a health care overhaul.

Between the plans, a family of four with an income of $5 million a year would see its annual income taxes skyrocket by more than $440,000. A similar family making $800,000 a year would get a tax increase of $30,000, according to an analysis by the financial services firm Deloitte Tax.

"I still think being wealthy is better than being poor," Clint Stretch, who heads tax policy at Deloitte Tax, said with a touch of understatement. "But this is a pretty high proposed tax burden."

Taxing the rich to pay for health insurance would represent a significant departure from the way Americans have financed safety net programs in the past.

Both Social Security and Medicare are supported by broad based payroll taxes. Although the rich pay more—they have bigger incomes—the burden is shared by the middle class and even the working poor.

By contrast, the health care plan working its way through the House would impose $544 billion in new taxes over the next decade on just 1.2 percent of households—joint filers making more than $350,000 a year.

The bill would impose a new 5.4 percent income surtax on couples making more than $1 million a year, starting in 2011. Couples making more than $350,000 would have to pay a surtax of 1 percent tax and those making more than $500,000 would pay a 1.5 percent surtax.

If certain savings in the health care system are not achieved by 2013, the surtax would rise to 2 percent for families making more than $350,000 and to 3 percent for those making more than $500,000.

For a family of four making $450,000 a year, the initial tax increase would be $1,000, according to the Deloitte analysis. But for the super rich, like a single filer making $5 million a year, the tax increase would be $452,000. The analysis assumes a typical mix of earned income, capital gains and itemized deductions for each income level.

Democrats said that for most of the affected taxpayers, the surtax would be far smaller.

"What we're talking about is frankly very, very small amounts for the overwhelming majority of people who will pay it," said Rep. Artur Davis, D-Ala.

The top marginal income tax rate now is 35 percent, on income above $372,950. Obama wants to boost the top rate to 39.6 percent in 2011 by allowing some of the tax cuts enacted under former President George W. Bush to expire.

The House Democrats' proposed health care surtax would increase the top rate to 45 percent, making it the highest top rate since 1986, when it was 50 percent.

Republicans complain that some taxpayers would face marginal tax rates above 50 percent, when federal and state taxes are combined. They also say that tax increases on the wealthy hurt small business owners who typically pay their business taxes on their individual returns.

Democrats say the tax increases would affect only 4.1 percent of tax filers who report small business income. Those small businesses, however, tend to be the ones that employ the most workers, according to data from the National Federation of Independent Business.

"We shouldn't have to resurrect the 1970s to remember that when tax rates go too high, people lose the incentive to build new businesses and create jobs," said Rep. Wally Herger, R-Calif. "These massive tax increases are no substitute for real fiscal responsibility."

Obama has tried to make the rich a popular target for tax increases as Democrats struggle to find ways to pay for his plan, intended to assure that virtually everyone gets health care. He regularly portrays the wealthy as big winners under Bush, noting that their taxes dropped and incomes soared during Bush's eight years in office.

"I think the best way to fund (health care) is for people like myself who have been very lucky, to pay a little bit more," Obama said recently.

The argument, however, omits the fact that Bush also cut taxes for middle- and low-income people. Their incomes didn't jump as much as they did for the wealthy, but effective federal tax rates for middle-income and low-wage workers are at or near 30-year lows.

This year, 47 percent of filers won't owe any federal income taxes—including some families making as much as $50,000 a year, according to separate projections by the Tax Policy Center and Deloitte Tax.

"Right now, if you are middle class or below, you are not expected to help pay to solve these problems," said Stretch, the tax policy adviser.
Leaders in House Seek to Tax Rich for Health Plan
NYTIMES
By DAVID M. HERSZENHORN
July 11, 2009

WASHINGTON — House Democrats will ask the wealthiest Americans to help pay for overhauling the health care system with a $550 billion income tax increase, the chairman of the tax-writing Ways and Means Committee said Friday.

The proposal calls for a surtax on individuals earning at least $280,000 in adjusted gross income and couples earning more than $350,000, said the chairman, Representative Charles B. Rangel of New York.

It would generate about $550 billion over 10 years to pay about half the cost of the legislation, Mr. Rangel said. As the proposal envisions it, the rest of the cost would be covered by lower spending on Medicare, the government health plan for the elderly, and other health care savings.

With the economy still hobbled and Republicans already sharpening their tax-and-spend attack line, the proposal is perhaps the clearest expression yet of the mandate that Democrats believe they won last November, when voters expanded Democratic majorities in Congress and sent Barack Obama to the White House.

An aide to the House speaker, Representative Nancy Pelosi of California, said she and other leaders were supportive of the idea, which they concluded would be their main way to pay for Mr. Obama’s top policy priority: expanding health insurance coverage to virtually all Americans and curtailing the steep rise in the cost of medical care while improving patient outcomes.

But it remains unclear whether the Senate will go along. Most Republicans there, or perhaps all, oppose the idea, along with some centrist Democrats.

Even in the more liberal House, where Democrats have a majority of 255 to 178, the tax proposal will most likely cost a substantial number of Democratic votes. The Blue Dog Coalition, made up of 52 fiscally conservative Democrats, expressed apprehension this week about the unfolding health care legislation, and that was before Mr. Rangel’s announcement Friday.

In recent days, efforts to advance the legislation in both houses of Congress have slowed. That development calls into question whether Democrats will be able to meet their goal of passing the bills before the August recess, reconciling differences between the two versions upon their return and then getting a final measure to Mr. Obama’s desk by October.

Among the biggest hurdles is the question of how to pay for the measure, which Mr. Obama has insisted not add to the national debt, a point he made again Friday at a news conference in Italy.

“Whatever bill is produced has to be paid for,” he said. “And that creates some difficulties, because people would like to get the good stuff without paying for it. And so there are going to be some tough negotiations in the days and weeks to come, but I’m confident that we’re going to get it done.”

“I never believe anything is do-or-die,” the president added, “but I really want to get it done by the August recess.”

Republicans, who have pummeled the Democrats over the $787 billion economic stimulus, pounced at word of the proposed tax increase, which they said would primarily hurt small-business owners.

“In the middle of a serious recession, with unemployment nearing double digits, the last thing we need is a tax increase on small businesses, which will cost the American economy even more jobs,” said Michael Steel, a spokesman for the House Republican leader, Representative John A. Boehner of Ohio.

The Senate health committee had hoped to approve its version of the health care legislation this week, but now expects to do that early next week. And Mr. Rangel and other House leaders had first said they would announce their plan to pay for the legislation on Thursday, only to be slowed by an array of disagreements.

But emerging from daylong committee negotiations Friday, Mr. Rangel said the income surtax would take effect in 2011 and begin at 1 percent of adjusted gross income — earnings before deductions like those for mortgage interest and charitable contributions — and would apply to individuals earning more than $280,000 and couples earning more than $350,000.

The surtax would be increased for individuals earning more than $400,000 and couples earning more than $500,000, and step up again for individuals earning over $800,000 and couples earning above $1 million. The precise extent of these increases has not been announced.

Mr. Rangel’s committee is also planning to insert language that would raise the surtax in 2013 if expected cost savings in the health care system do not materialize.

Mr. Rangel said the surtax was the “best way” to raise money for the health care overhaul, and it seemed to highlight a broader unwillingness by Ms. Pelosi and her caucus to compromise on what they see as crucially needed improvements to the system, including the creation of a government-run insurance plan that would compete against private insurers.
Facing Hard Facts:  By any accounting standards, except those used by politicians, the nation is bankrupt
DAY
By Matt Crenson, Associated Press 
Published on 10/29/2006
 
David M. Walker sure talks like he's running for office. “This is about the future of our country, our kids and grandkids,” the comptroller general of the United States warns a packed hall at Austin's historic Driskill Hotel. “We the people have to rise up to make sure things get changed.”

But Walker doesn't want, or need, your vote this November. He already has a job as head of the Government Accountability Office, an investigative arm of Congress that audits and evaluates the performance of the federal government.

Basically, that makes Walker the nation's accountant-in-chief. And the accountant-in-chief's professional opinion is that the American public needs to tell Washington it's time to steer the nation off the path to financial ruin.

From the hustings and the airwaves this campaign season, America's political class can be heard debating Capitol Hill sex scandals, the wisdom of the war in Iraq and which party is tougher on terror. Democrats and Republicans talk of cutting taxes to make life easier for the American people.

What they don't talk about is a dirty little secret everyone in Washington knows. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course, and will founder on the reefs of economic disaster if nothing is done to correct it.

There's a good reason politicians don't like to talk about the nation's long-term fiscal prospects. The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions. Anybody who wanted to deal with it seriously would have to talk about raising taxes and cutting benefits, nasty nostrums that might doom any candidate who prescribed them.

“There's no sexiness to it,” laments Leita Hart-Fanta, an accountant who has just heard Walker's pitch. She suggests recruiting a trusted celebrity — maybe Oprah — to sell fiscal responsibility to the American people.

Walker doesn't want to make balancing the federal government's books sexy — he just wants to make it politically palatable. He has committed to touring the nation through the 2008 elections, talking to anybody who will listen about the fiscal black hole Washington has dug itself, the “demographic tsunami” that will come when the baby boom generation begins retiring and the recklessness of borrowing money from foreign lenders to pay for the operation of the U.S. government.

“He can speak forthrightly and independently because his job is not in jeopardy if he tells the truth,” said Isabel V. Sawhill, a senior fellow in economic studies at the Brookings Institution.

Walker can talk in public about the nation's impending fiscal crisis because he has one of the most secure jobs in Washington. As comptroller general of the United States — basically, the government's chief accountant — he is serving a 15-year term that runs through 2013.

This year Walker has spoken to the Union League Club of Chicago and the Rotary Club of Atlanta, the Sons of the American Revolution and the World Future Society. But the backbone of his campaign has been the Fiscal Wake-up Tour, a traveling roadshow of economists and budget analysts who share Walker's concern for the nation's budgetary future.

“You can't solve a problem until the majority of the people believe you have a problem that needs to be solved,” Walker says.

Polls suggest that Americans have only a vague sense of their government's long-term fiscal prospects. When pollsters ask Americans to name the most important problem facing America today — as a CBS News/New York Times poll of 1,131 Americans did in September — issues such as the war in Iraq, terrorism, jobs and the economy are most frequently mentioned. The deficit doesn't even crack the top 10.

Yet on the rare occasions that pollsters ask directly about the deficit, at least some people appear to recognize it as a problem. In a survey of 807 Americans last year by the Pew Center for the People and the Press, 42 percent of respondents said reducing the deficit should be a top priority; another 38 percent said it was important but a lower priority.

So the majority of the public appears to agree with Walker that the deficit is a serious problem, but only when they're made to think about it. Walker's challenge is to get people not just to think about it, but to pressure politicians to make the hard choices that are needed to keep the situation from spiraling out of control.

To show that the looming fiscal crisis is not a partisan issue, he brings along economists and budget analysts from across the political spectrum. In Austin, he's accompanied by Diane Lim Rogers, a liberal economist from the Brookings Institution, and Alison Acosta Fraser, director of the Roe Institute for Economic Policy Studies at the Heritage Foundation, a conservative think tank.

“We all agree on what the choices are and what the numbers are,” Fraser says.

Their basic message is this: If the United States government conducts business as usual over the next few decades, a deficit that is already $8.5 trillion could reach $46 trillion or more, adjusted for inflation. That's almost as much as the total net worth of every person in America — Bill Gates, Warren Buffett and those Google guys included.

A hole that big could paralyze the U.S. economy; according to some projections, just the interest payments on a debt that big would be as much as all the taxes the government collects today.

And every year that nothing is done about it, Walker says, the problem grows by $2 trillion to $3 trillion.

People who remember Ross Perot's rants in the 1992 presidential election may think of the federal debt as a problem of the past. But it never really went away after Perot made it an issue, it only took a breather. The federal government actually produced a surplus for a few years during the 1990s, thanks to a booming economy and fiscal restraint imposed by laws that were passed early in the decade. And though the federal debt has grown in dollar terms since 2001, it hasn't grown dramatically relative to the size of the economy.

But that's about to change, thanks to the country's three big entitlement programs — Social Security, Medicaid and especially Medicare. Medicaid and Medicare have grown progressively more expensive as the cost of health care has dramatically outpaced inflation over the past 30 years, a trend that is expected to continue for at least another decade or two.

And with the first baby boomers becoming eligible for Social Security in 2008 and for Medicare in 2011, the expenses of those two programs are about to increase dramatically due to demographic pressures. People are also living longer, which makes any program that provides benefits to retirees more expensive.

Medicare already costs four times as much as it did in 1970, measured as a percentage of the nation's gross domestic product. It currently comprises 13 percent of federal spending; by 2030, the Congressional Budget Office projects it will consume nearly a quarter of the budget.

Economists Jagadeesh Gokhale of the American Enterprise Institute and Kent Smetters of the University of Pennsylvania have an even scarier way of looking at Medicare. Their method calculates the program's long-term fiscal shortfall — the annual difference between its dedicated revenues and costs — over time.

By 2030 they calculate Medicare will be about $5 trillion in the hole, measured in 2004 dollars. By 2080, the fiscal imbalance will have risen to $25 trillion. And when you project the gap out to an infinite time horizon, it reaches $60 trillion.

Medicare so dominates the nation's fiscal future that some economists believe health care reform, rather than budget measures, is the best way to attack the problem.

“Obviously health care is a mess,” says Dean Baker, a liberal economist at the Center for Economic and Policy Research, a Washington think tank. “No one's been willing to touch it, but that's what I see as front and center.”

Social Security is a much less serious problem. The program currently pays for itself with a 12.4 percent payroll tax, and even produces a surplus that the government raids every year to pay other bills. But Social Security will begin to run deficits during the next century, and ultimately would need an infusion of $8 trillion if the government planned to keep its promises to every beneficiary.

Calculations by Boston University economist Lawrence Kotlikoff indicate that closing those gaps — $8 trillion for Social Security, many times that for Medicare — and paying off the existing deficit would require either an immediate doubling of personal and corporate income taxes, a two-thirds cut in Social Security and Medicare benefits, or some combination of the two.

Why is America so fiscally unprepared for the next century? Like many of its citizens, the United States has spent the last few years racking up debt instead of saving for the future. Foreign lenders — primarily the central banks of China, Japan and other big U.S. trading partners — have been eager to lend the government money at low interest rates, making the current $8.5-trillion deficit about as painful as a big balance on a zero-percent credit card.

In her part of the fiscal wake-up tour presentation, Rogers tries to explain why that's a bad thing. For one thing, even when rates are low a bigger deficit means a greater portion of each tax dollar goes to interest payments rather than useful programs. And because foreigners now hold so much of the federal government's debt, those interest payments increasingly go overseas rather than to U.S. investors.

More serious is the possibility that foreign lenders might lose their enthusiasm for lending money to the United States. Because treasury bills are sold at auction, that would mean paying higher interest rates in the future. And it wouldn't just be the government's problem. All interest rates would rise, making mortgages, car payments and student loans costlier, too.

A modest rise in interest rates wouldn't necessarily be a bad thing, Rogers said. America's consumers have as much of a borrowing problem as their government does, so higher rates could moderate overconsumption and encourage consumer saving. But a big jump in interest rates could cause economic catastrophe. Some economists even predict the government would resort to printing money to pay off its debt, a risky strategy that could lead to runaway inflation.

Macroeconomic meltdown is probably preventable, says Anjan Thakor, a professor of finance at Washington University in St. Louis. But to keep it at bay, he said, the government is essentially going to have to renegotiate some of the promises it has made to its citizens, probably by some combination of tax increases and benefit cuts.

But there's no way to avoid what Rogers considers the worst result of racking up a big deficit — the outrage of making our children and grandchildren repay the debts of their elders.

“It's an unfair burden for future generations,” she says.

You'd think young people would be riled up over this issue, since they're the ones who will foot the bill when they're out in the working world. But students take more interest in issues like the Iraq war and gay marriage than the federal government's finances, says Emma Vernon, a member of the University of Texas Young Democrats.

“It's not something that can fire people up,” she says.

The current political climate doesn't help. Washington tends to keep its fiscal house in better order when one party controls Congress and the other is in the White House, says Sawhill.

“It's kind of a paradoxical result. Your commonsense logic would tell you if one party is in control of everything they should be able to take action,” Sawhill says.

But the last six years of Republican rule have produced tax cuts, record spending increases and a Medicare prescription drug plan that has been widely criticized as fiscally unsound. When President Clinton faced a Republican Congress during the 1990s, spending limits and other legislative tools helped produce a surplus.

So maybe a solution is at hand.

“We're likely to have at least partially divided government again,” Sawhill said, referring to predictions that the Democrats will capture the House, and possibly the Senate, in next month's elections.

But Walker isn't optimistic that the government will be able to tackle its fiscal challenges so soon.

“Realistically what we hope to accomplish through the fiscal wake-up tour is ensure that any serious candidate for the presidency in 2008 will be forced to deal with the issue,” he says. “The best we're going to get in the next couple of years is to slow the bleeding.”


Simsbury Suffering 'Perfect Storm' Of Revenue Woes
The Hartford Courant
By RINKER BUCK
December 22, 2008

SIMSBURY—

Mary Glassman is the cheerful, progressive first selectman of this prosperous Farmington Valley town. Glassman says that during 17 years of service in local and state government, she's always enjoyed the "challenge of making the public sector work better for people."

But reporting to work every day at Simsbury's gothic town hall is no longer an optimistic venture.

The national economic meltdown — which has shredded municipal tax revenues and led to skyrocketing home foreclosures — hasn't so much trickled as flooded down to local government. The repercussions are nearly overwhelming even a wealthy community's ability to cope.

Since last summer, when the collapse of mortgage-backed securities sparked a national financial emergency, Simsbury leaders have cut capital spending for recreation projects, reduced library hours and watched helplessly as virtually all local home building stopped. With Gov. M. Jodi Rell's administration facing its own massive budget gap, Simsbury is virtually guaranteed to lose up to 20 percent of its $5 million in annual state education aid. The town may be looking at a $1 million budget shortfall next year, which Glassman worries can't be weathered without layoffs of town employees.

"This is the perfect storm of municipal finance, and a disaster for Connecticut towns," Glassman says.

"The state is staring at a $6 billion deficit for the next two years, which means they have to cut our state aid. Well, because of the structure of government in Connecticut, we have no other source of income. No one has ever seen it this bad."

Simsbury's budget woes are not unique. Faced with the same prospect of red ink, Rell's hometown of Brookfield is experimenting with a four-day work week to reduce gasoline and heating costs. West Hartford has cut its capital budget by $25 million over the next three years.

"Simsbury is just joining a long line of towns in budget distress," says Lyle Wray, the executive director of the Capitol Region Council of Governments. "We're hearing a lot about draconian solutions to budget deficits, and the next thing for these towns might be painful personnel cuts.

"The challenge is to cut budgets without hurting the vulnerable people in town," Wray said. "We also need to be careful that we're not destroying a town's infrastructure, so that when a recovery finally comes, we're prepared to improve communities again."

In Simsbury, the national economic crisis has had several direct impacts. In normal years, Glassman says, the town could anticipate the retirement of at least a few senior teachers, police officers and other town employees. These veteran workers, often supervisors, commanded the highest salaries, allowing the town to save money, either by replacing them with lower-paid new hires or allowing vacancies for a year or two.

Simsbury had expected that about six senior workers would retire this year, but most have elected to stay for an additional year until the economy improves and they can sell their houses. Now the town will have to spend more money to keep those workers on because they're entitled to pay increases mandated by contracts.

The town budget has grown from $47.9 million in 1998 to $78.4 million this fiscal year, largely as a result of rising costs for town services and an increase over the past decade of about 350 students in the school system. More than 70 percent of the budget is spent by the schools, which are controlled by the board of education, not the selectmen. Most of those education costs are determined by state mandates and teachers' contracts.

In the past, even though selectmen have no say in the education budget, they have been expected to help defray the costs of cutbacks in state education aid by cutting their own budget for town services. At a recent meeting, the board of finance affirmed this practice and made it clear that town services will have to be cut to make up for education aid cuts next year, town Finance Director Kevin G. Kane said.

"It's kind of like being the little brother in the family, the one that always gets hit on," Kane says.

Another problem is the collapse of the local housing market. Kane says Simsbury now has a total of 48 properties in some state of bank foreclosure, compared with just a handful — or none — in earlier budget years. Until those properties are sold to new buyers who resume property-tax payments, the town could face a shortfall in its collections.

Town Engineer Richard Sawitzke says that in 2006, Simsbury zoning and building officials had approved 200 new houses for construction, only about 60 of which were built before the financial crunch hit this year. Now there are virtually no construction projects in town. At least one large mixed-use retail and residential project has been shelved for the moment, denying the town valuable new tax revenues.

"One of the things that always made budgets work in towns like Simsbury was that there was always some new growth from development, which the town didn't necessarily count on," Sawitzke says. "Some new commercial project would suddenly appear, or a builder would come in and build a new huge home and then, boom, you suddenly have a reserve of property tax income that allowed you to balance the budget. Well, there is nothing. ... I've been here for 27 years and I've never seen that before."

Unlike neighboring states such as New York, which funnel federal largesse for everything from water treatment to transit projects through county governments or regional authorities, Connecticut has no substantial regional authorities. That makes towns increasingly reliant on local property taxes.

"Twenty years ago, 74 percent of our budget was provided by property taxes, and now that figure is 90 percent," Glassman says. "Your options are really quite limited when that much of your budget depends on one source."

But for both political and practical reasons, Glassman is reluctant to raise taxes. She worries that elderly homeowners on fixed incomes can't afford more. Other taxpayers — recently retired couples who planned to either downsize or sell their homes and move out of state — are trapped in place because home sales have slowed to a trickle.

Glassman thinks state leaders should consider legislation to let towns raise additional funds through vehicle registration surcharges, local sales taxes and hotel taxes, a course that has been proposed by CRCG and the Connecticut Conference of Municipalities. Glassman acknowledges that such choices are politically risky.

"Yes, new sources of revenue ... are unpopular," Glassman says. "But cutting school budgets and not plowing roads are not popular either."

Glassman says there may be a silver lining in all of this budget despair.

"Things are so bad now it's going to force all of us to look at issues we've never dealt with in a state with a heavy reliance on the property tax," she says. "We have no other mechanisms to balance budgets. Now Connecticut finally has to face that."

The wrong kind of 'help' for cities
Stamford ADVOCATE
Staff Reports
Article Launched: 04/18/2008 02:58:24 AM EDT


While you might want to give some credit to state lawmakers for seeking to help Connecticut's distressed cities, several recent cases suggest they're looking for too easy a way out. Last month, the Legislature kicked around a proposal to have some municipalities levy their own sales taxes to raise local revenue. More recently, a legislative panel raised a proposal to allow 18 cities and towns - including Norwalk and Stamford - to take some of the tax burden off residential property, with the commercial side and personal property likely having to pick up the slack as a result.

A metaphor over-used and abused nonetheless seems appropriate here: Those efforts would be like "rearranging the deck chairs on the Titanic" - rearranging instead how individual municipalities distribute their tax burdens. The cities' root problems of overall high taxes and lack of revenue to cover important and basic services likely would remain.

Meanwhile, such "assistance" programs might be like steering the already damaged ship into another iceberg, discouraging business relocation to and investment in urban areas, currently about the only way they can significantly pump up their revenue. Such "help" might even drive taxpaying businesses out.

The latest measure, known as "An Act Concerning a Homestead Exemption," would allow the communities to exempt from property taxes the first $100,000 of the assessed value of any residential, owner-occupied property that meets certain criteria. Using the exemption privilege would be voluntary for communities.

No doubt it would benefit overburdened homeowners, at least initially. However, what happens if the businesses expected to pay the difference depart? Bridgeport Mayor Bill Finch, whose city would fall under the act, is wary of this bill. As a state senator, he sponsored variations on this homestead exemption theme, but only if coupled with compensating state aid.

Meanwhile, another questionable way proposed in the Legislature to aid urban areas is a new tax on deliveries. While details and impact have been unclear, it is obvious that it would add another expense to doing business in the state, and ultimately cost consumers.

There are many factors at the root of urban problems - local government mismanagement among them. But cities also face some big challenges because they host substantial numbers of the poor, including new immigrants, as well as regional medical, social service and other programs. And it must be noted that better-off Connecticut cities and towns also are experiencing financial strains, so urban areas cannot be assigned all the blame for theirs.

One big reason for municipal fiscal difficulties is the dependence on property taxes for most local government services, particularly local public schools. It's the "800-pound gorilla" that state and local leaders ultimately must wrestle, even though they would like to avoid doing so. If you'll permit us another metaphor a bit more fanciful: That gorilla's aboard the Titanic too - and his weight may be making it sink faster.

Connecticut's Property Taxes In State Of Crisis 
DAY
By Juan O’Callahan    
Published on 2/3/2008 

Connecticut has the second highest local property taxes per capita in the nation. Forty-eight states have a better deal for residents who want to live in their homes for their lifetimes.

Gov. M. Jodi Rell, although initially indicating there appeared to be scant evidence of a looming crisis over Connecticut's property taxes, is now promoting a cap on annual rates of increase.

Based on articles in local newspapers and from letters to the editor across the state, there appears to be mounting outrage by the citizens of Connecticut, especially so among elderly seniors, in regard to rapidly escalating local property taxes.

If the state of Connecticut were able to hold a referendum on an annual percentage cap for property tax increases, it would pass overwhelmingly. However, unlike many other states, there is no such opportunity for Connecticut voters.

Local property taxes are directly tied to, and depend on, cities' and towns' budgets and annual budget increases. In Connecticut, many — if not most — cities and towns have had runaway annual escalation rates applied to their budgets. In Stonington, for example, the average annual budget increase over two decades has been two-and-a-half times the level of inflation.

According to the press, Gov. Rell's proposal is to legislate a 3 percent per annum cap on local property tax escalation rates. That would be somewhat higher than current Consumer Price Index (CPI) inflation, but considerably better than the historical 5 percent and 6 percent annual increases of the past 15 to 20 years.

Gov. Rell's proposal will apparently face substantial opposition in the Democrat-controlled Legislature and from local municipalities.

Isn't it time that something be done about the looming property tax crisis in Connecticut?

Perhaps the first step is to help those who are hurt most. Hurt most of all by the inordinate increases in Connecticut's property taxes are its over-70 seniors who are on fixed retirement incomes and living on Social Security and declining nest eggs. Every few years, thousands of widows, widowers, elderly couples and other over-70s have to sell their cherished, longtime homes and move to another town or out-of-state.

At least 24 states have legislation in place that defers or freezes property taxes for its oldest senior citizens ... until they die, move, or renovate their properties. The rules vary state by state. Some states specify that the qualifying senior must be 70 or older (Arizona, Florida, South Dakota) and have lived at his or her home for at least 10 years. Some states lower that qualifying age to 65 or 67 (Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, North Dakota, Tennessee, Texas, Utah, Virginia, and Wisconsin). Some of the states set the time-in-residence at five to seven years, a few at 15 years. (Other states that offer property tax deferral programs include: California, Colorado, Georgia, Oregon, Washington, Wyoming, and Pennsylvania.) Connecticut has nothing comparable.

In nearly all respects, Connecticut is not only behind the times, but it is punitive to its most mature population. No wonder so many towns and villages empty out in the fall and tens of thousands of Connecticut Yankees go to Florida. Indeed, they often opt to become residents of states like Florida, South Carolina, Arizona or Nevada.

Connecticut's state senators and representatives should wake up to the crisis they are denying. Act now. Place an annual escalation cap on property tax escalation rates (or on cities' and towns' budgets): And begin property tax reform by initially legislating a living break for seniors in their 70s — those who have lived in their homes for a long time and want to stay there until death or incapacitation — by deferring or freezing their local property taxes.

Let's make Connecticut a good home for senior citizens. 

We just watched 1938 version of "Robin Hood" last evening...
Group Presses For More Equitable Tax Table;  Voices For Children: Poor, middle class are paying too much 
DAY
By Ted Mann    
Published on 4/15/2008 

Hartford — Connecticut's poor and middle class pay a much higher percentage of their annual income in taxes than the wealthy, a nonprofit policy organization contended in a study published Monday.

And the organization, Connecticut Voices for Children, a liberal stalwart in budget debates in Hartford, used its findings and the occasion of today's tax deadline to push for greater state aid to offset property taxes, new tax credits for the working poor and higher taxes on the state's wealthiest citizens.

“Middle and lower income families are going into this recession uniquely vulnerable,” said the group's president, Shelley Geballe, in a phone interview.

“The story's basically the same” since the organization last did a similar study in 2002, Geballe said. “The poorest 80 percent, if that's what you want to call it, pays a much larger share than the top 20 percent.”

The reason, said Geballe, is both the lack of a fully progressive income tax structure — which, through a system of multiple brackets, requires individuals to pay more as their earnings rise — and the regressive nature of sales and property taxes, which fall hardest on those with the least income and ability to pay.

The group seemed to anticipate a frequent rebuttal from opponents of more progressive income tax structures in the state — that a small minority of wealthy individuals pay a large share of the income tax revenues collected in Connecticut each year.

But that, Geballe said Monday, is because they also are taking in a large share of the state's income.

The top 1 percent of taxpayers in 2006 paid 33 percent of Connecticut's income tax revenues that year, but had also earned 31 percent of the reported taxable income at the same time.

The top 6 percent of taxpayers in the same period raked in nearly half the income reported on the state's tax returns: 48 percent.

“It's just that they have a lot more income than everybody else,” Geballe said.

The top 1 percent of Connecticut earners paid an average of 4.7 percent of household income in combined state and local taxes, the study found, when federal exemptions are factored in. (The top 1 percent earned $3.3 million on average in 2006, the group said.)

Meanwhile, the middle class paid a percentage of income roughly twice as high — 9.6 percent of an average yearly take of $55,100. The poorest 20 percent of families, including many too poor to qualify for income taxation, paid 10.9 percent of an average annual income of $15,100 in taxes.

To Connecticut Voices, the policy prescriptions are clear: Establish a refundable earned-income tax credit for the working poor, as neighboring states have done, boost aid to cities and towns to help hold down the property tax increases that have afflicted the middle class in particular, and add a new, higher top tax bracket for some of Connecticut's most affluent residents.

But those proposals range from the possible to the downright dubious at a time of dimming revenue projections and a fall election on the horizon.

Democratic leaders have shown no inclination of rejoining last year's abortive attempt to increase the income tax on some wealthy residents, and both parties have counseled caution in creating major new state spending, such as municipal aid, when it is unclear how the national recession will affect Connecticut in coming years.

But Geballe said the group feels there is some momentum for the creation of the earned-income tax credit, a version of which was vetoed last year by Republican Gov. M. Jodi Rell.

It has a Republican pedigree after all, the measure's supporters point out, originally conceived of as a “negative income tax” and supported by President Reagan. And this year, it has some current-day Republican support, from Senate Minority Leader John McKinney of Fairfield.

Jewish Home move hinges on Monroe taxes
CT POST
By JOEL C. THOMPSON
Article Last Updated: 09/10/2008 10:13:52 AM EDT

MONROE — A $200 million plan to move the Jewish Home for the Elderly from Fairfield to a 40-acre Main Street site next to the Swiss Army headquarters is getting generally favorable reviews from town residents.

But misgivings about sharing property tax revenue from the project with Trumbull and Bridgeport -- to compensate those communities for sewage disposal -- are also being expressed.

Robert Scinto, a Shelton-based developer, outlined preliminary plans for the new Jewish Home during the Town Council meeting Monday night. He was joined by Andrew Banoff, president of the Jewish Home, which is now on Jefferson Street in Fairfield. The presentation was followed by an opportunity for the public to comment.

"This project is something that's been a dream, but it's now becoming reality," Banoff said.

He said the Jewish Home, in its current location has been only a skilled-nursing facility, but the concept has been to expand it to include an assisted-living component and a residential section, something he said is needed in greater Bridgeport.

Scinto said he has been working about two years on the project, partly because Monroe lacks sewers needed to support the large project.

As a result, he said has forged a proposal under which Monroe, Trumbull and Bridgeport would share equally in property taxes generated by the facility, estimated at about $1.5 million annually.

Though Monroe's share of the property tax would be about $500,000, it would also receive revenue from personal property and motor vehicle taxes at the assessed at the project, increasing its tax proceeds to about $714,000, he said.

"Bridgeport needs to be compensated for the capacity in its sewer system it would give up that could impact its development of Steel Point," Scinto said. "Trumbull also needs to be compensated because it spent millions to develop its sewers."

The developer said he would pay to build a sewer line to link the proposed new Jewish Home to the Trumbull sewers, which sends its effluent to be processed in the Bridgeport treatment plants.

If the tax revenue sharing plan fails to materialize, Scinto said he would be forced to move the project to a Trumbull site, even if the Jewish Home would prefer to relocate in Monroe. A retail facility might then be built on the Monroe site, producing 50 percent or less of the tax income the Jewish Home would under the proposed revenue sharing plan, he said.

However, the idea of sharing the tax revenue equally with Trumbull and Bridgeport drew protests from several Monroe Town Council members and residents, some of whom also spoke in favor of the project.

"I'm concerned about Monroe, Trumbull and Bridgeport each receiving one-third of the property taxes," said Enid Lipeles, the council chairwoman. "I would prefer Monroe receiving $1 million and allowing Trumbull and Bridgeport to have $250,000 each."

Lipeles said Monroe should be compensated for added service costs, such as emergency medical, fire and police coverage for the project.

Elizabeth Edgerton, a Board of Education member, said the people of Monroe may feel they have been shortchanged in the tax revenue sharing deal, because of the home's potential impact on town services.

Responding to comments made by Lipeles, Edgerton and others, First Selectman Tom Buzi said he would attempt to renegotiate the revenue sharing plan with Scinto, Trumbull First Selectman Raymond Baldwin and Bridgeport Mayor Bill Finch.

Buzi described the project as the largest in Monroe's history and a "once-in-a-lifetime" opportunity for the town.

Panel: Hike gas tax
Norwalk HOUR
By JOAN LOWY, Associated Press
Jan. 1, 2009

WASHINGTON

A 50 percent increase in gasoline and diesel fuel taxes is being urged by a federal commission to finance highway construction and repair until the government devises another way for motorists to pay for using public roads.  The National Commission on Surface Transportation Infrastructure Financing, a 15-member panel created by Congress, is the second group in a year to call for higher fuel taxes.  With motorists driving less and buying less fuel, the current 18.4 cents a gallon gas tax and 24.4 cents a gallon diesel tax fail to raise enough to keep pace with the cost of road, bridge and transit programs.

Connecticut adds a 7 percent tax on the wholesale price of gasoline that station owners pay. The state also charges a 25 cent per gallon excise tax at the pump. On Sunday the average price for gas in Norwalk was $1.68 according calculations done by The Hour. In July Connecticut gas prices hit an all-time high of $4.39.

In a report expected in late January, members of the infrastructure financing commission say they will urge Congress to raise the gas tax by 10 cents a gallon and the diesel fuel tax by 12 to 15 cents a gallon. At the same time, the commission will recommend tying the fuel tax rates to inflation.  The commission will also recommend that states raise their fuel taxes and make greater use of toll roads and fees for rush-hour driving.

A tax increase on this order would be politically treacherous for Democratic leaders in Congress -- a gas tax hike was one of the reasons they lost control of the House and Senate in the 1994 elections. President-elect Barack Obama has expressed concern about raising gas taxes in the current economic climate. But commission members said the government must find the money somewhere.

"I'm not excited about a gas tax increase, but the reality is our current gas tax doesn't pay for upkeep of the system we have now," said Adrian Moore, vice president of the Reason Foundation, a libertarian think tank in Los Angeles, and a member of the highway revenue commission. "We can either let the roads go to hell or we can pay more."

The dilemma for Congress is that highway and transit programs are dependent for revenue on fuel taxes that are not sustainable.  Many Americans are driving less and switching to more fuel-efficient cars and trucks, and a shift to new fuels and technologies like plug-in hybrid electric cars will further erode gasoline sales.  According to a draft of the financing commission's recommendations, the nation needs to move to a new system that taxes motorists according to how much they use roads.

"Most if not all of the commissioners have a strong belief and commitment that we need a fundamental transformation of the current system," said commission chairman Robert Atkinson, president of the Information Technology and Innovation Foundation, a technology policy think tank in Washington.  A study by the Transportation Research Board of the National Academies estimated that the annual gap between revenues and the investment needed to improve highway and transit systems was about $105 billion in 2007, and will increase to $134 billion in 2017 under current trends.

Projected shortfalls in revenue led the National Surface Transportation Policy and Revenue Study Commission, in a report issued in January 2008, to call for an increase of as much as 40 cents a gallon in the gas tax, phased in over five years.

Charles Whittington, chairman of the American Trucking Associations, which supports a fuel tax increase as long as the money goes to highway projects, said Congress may decide to disguise a fuel tax hike as a surcharge to combat climate change.  Transportation is responsible for about a third of all U.S. carbon emissions created by burning fossil fuels. Traffic congestion wastes an estimated 2.9 billion gallons of fuel a year. Less congestion would reduce greenhouse gases and dependence on foreign oil.

"Instead of calling it a gas tax, call it a carbon tax," Whittington said. "As long as we label it as something else we may have the momentum and acceptance to move forward."

Bottlenecks around the nation cost the trucking industry about 243 million lost truck hours and about $7.8 billion per year, according to the commission.

The financing commission thinks the long-term solution is a mileage-based revenue system. While details have not been worked out, such a system would mean equipping every car and truck with a device that uses global positioning satellites and transponders to record how many miles the vehicle has been driven, the type of roads and time of day. Creation and installation of such a system would take about 10 years.

Moore said commission members were initially concerned that using technology to track driving might violate drivers' privacy, but they've been assured that such a system could be designed to prevent vehicles from being "tracked in some big brotherish way."

"Soak the rich" coming even more in CT?
Revenue Reversal
Weekly Standard
BY J.T. Young
January 15, 2010 12:00 AM

Last year’s unsurprisingly dismal budget numbers contain a surprising revenue story.  While overall federal revenue fell precipitously, payroll tax revenue barely dipped at all.  This divergent tale of two taxes has one conclusion but many implications.  America’s tax system, decidedly tilted toward upper income earners, is precariously balanced.  It is not only volatile in economic downturns – it is unsustainable long term.

The Congressional Budget Office recently reported that overall federal revenues fell 16.6 percent in fiscal year 2009.  While corporate income tax revenues fell 54.6 percent and income tax revenues fell 20.1 percent, payroll tax revenue funding Social Security and Medicare slipped just 1 percent.

This dramatic difference is underscored by its impact.  If all federal revenue had fallen just 1 percent, the federal government would have taken in an additional $394 billion, and the 2009 deficit would have fallen nearly 30 percent – from $1.4 trillion to $1 trillion.  These differences matter.

How can this gulf be explained?  Some will say the Stimulus Bill’s tax cut reduced income tax revenue.  True, but it is hardly significant compared to the overall revenue drop.  Congress’s nonpartisan Joint Committee on Taxation (JCT) estimated just a $19.9 billion 2009 loss from the Stimulus’s Making Work Pay tax credit.  Even if accurate, and if all the credit’s cost came from lost income tax revenue (rather than increased spending), income tax revenue in 2009 would still have fallen by 18.5 percent.

A reason to doubt that the entire credit’s cost was lost revenue is that the tax credit began phasing out for taxpayers with an adjusted gross income above $75,000.  That income threshold is important.  According to the JCT tax, those who make below $75,000 comprise of 78.5 percent of all tax returns but pay just 3.4 percent of all federal income taxes and 42.8 percent of all payroll taxes.

Conversely, those who make above $75,000 file 21.5 percent of all tax returns, but together they pay 96.6 percent of all federal income taxes.  Also, this bracket pays 57.2 percent of all payroll taxes.

These figures show how top heavy the progressive U.S. income tax system has become.  Supported by top earners, the income tax system resembles an inverted pyramid, which rests on an ever-smaller point.

Because of the income tax system’s progressive nature, taxes burden higher earners at an increasing rate.  Contrastingly, the payroll tax falls on lower earnings and continues at a flat rate (ending at an income threshold for Social Security).  The effect is that although upper earners pay a disproportionate share of payroll taxes too, it is far less than their income share.  The reason is, in the case of income taxes, when incomes fall, less income is taxed and at lower rates.

The income tax’s inherent volatility is widely known – though rarely reported.  Earners routinely migrate up and then down the income ladder as they age.  These earners’ top marginal rates change with this migration.  That the same pattern would be replicated by other factors affecting earnings – such as a recession – is hardly surprising.

Profound implications come from this. For one, if there is a moment when income moves away from earners in a recession, then something similar must happen if earners were to move away from income – as in the case of excessive marginal rates.  Should rates be deemed too onerous, individuals may substitute other goods for income – nonmonetary goods, such as more leisure – as well as undertake more complicated tax deferral and avoidance actions.  The resulting effect would be similar to that of the economic downturn’s revenue drop.

These dynamics question a tax strategy premised on ever increasing top marginal rates.  The more projected revenues are based on higher progressive rates, the less secure is the fiscal superstructure resting on it.  Our tax system is already exceedingly dependent on top earners earning top dollars.  However, the goose plucked today should not be counted on to be so well feathered tomorrow.

Simply put, if projected revenue does not materialize, then the entire system will continue to reel. The money has to be found somewhere.  The payroll tax shows durability and potential for growth. As surging federal spending spurs surging federal deficits, the revenue potential of more than three-quarters of America’s earners will not go unnoticed by Washington’s spenders for long.

J.T. Young served in the Department of Treasury and the Office of Management and Budget from 2001-2004 and as a Congressional staff member from 1987-2000.
Op-Ed Contributor
Please Raise My Taxes
NYTIMES
By REED HASTINGS
February 6, 2009

Los Gatos, Calif.

I’M the chief executive of a publicly traded company and, like my peers, I’m very highly paid. The difference between salaries like mine and those of average Americans creates a lot of tension, and I’d like to offer a suggestion. President Obama should celebrate our success, rather than trying to shame us or cap our pay. But he should also take half of our huge earnings in taxes, instead of the current one-third.

Then, the next time a chief executive earns an eye-popping amount of money, we can cheer that half of it is going to pay for our soldiers, schools and security. Higher taxes on huge pay days can finance opportunity for the next generation of Americans.

Clearly, the efforts over the past few decades to control executive compensation haven’t accomplished much. Improved public disclosure was supposed to shame companies into lowering salaries, and it obviously hasn’t worked. In 1993, President Bill Clinton changed the tax law to effectively cap executives’ salaries at $1 million a year, but that simply drove corporate boards to offer larger bonuses and stock options to attract and keep talent. More recently, “say on pay” proposals would have shareholders opine on their boards’ compensation decisions, but “say and pay” won’t change the fact that luring a top executive away from another company is never easy or cheap.

The reality is that the boards of public companies hate overpaying for anything, including executives. But picking the wrong chief executive is an enormous disaster, so boards are willing to pay an arm and a leg for already proven talent. Putting limits on the salaries at public companies, or trying to shame them into coming down, won’t stop this costly competition for talent.

Of course, it’s galling when a chief executive fails and is still handsomely rewarded. But with the concept of “tax, not shame,” a shocking $20 million severance package would generate $10 million for the government. That’s a far better solution than what we have today, not least because it works with the market rather than against it.

Another advantage is that it would also cover the sometimes huge earnings of hedge fund managers, star athletes, stunning movie stars, venture capitalists and the chief executives of private companies. Surely there is no reason to focus only on executives at publicly traded companies.

This week, President Obama proposed imposing a $500,000 compensation cap on companies seeking a bailout. It’s a terrible idea. We all want the taxpayers’ money returned, and capping compensation at bailout recipients will just make it that much harder for those boards to hire and hold on to the executives who can lead their companies to compete and thrive.

Perhaps a starting place for “tax, not shame” would be creating a top federal marginal tax rate of 50 percent on all income above $1 million per year. Some will tell you that would reduce the incentive to earn but I don’t see that as likely. Besides, half of a giant compensation package is still pretty huge, and most of our motivation is the sheer challenge of the job anyway.

Instead of trying to shame companies and executives, the president should take advantage of our success by using our outsized earnings to pay for the needs of our nation.