Public Hearing in Stamford...
Connecticut's Tax System - from 2005 Long Session: http://www.cga.ct.gov/pri/year2005studies.htm

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.

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."

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.”


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.