Connecticut’s Media-Progressive Complex: Or -- It’s The Spending, Not The Taxes, Stupid

CTMirror asks in a recent story “Is it time to overhaul Connecticut’s tax system?”

The progressive wing of the Democratic Party, now in the ascendency in Connecticut, has been trying to “reform” the tax system ever since it was last reformed in 1991 by then Governor Lowell Weicker, the father of Connecticut’s income tax.

In the course of its story, CTMirror quotes William Cibes, identified as “state budget director under Weicker and also co-chairman of the finance committee in 1989-90,” on property taxes. Mr. Cibes recently testified before the General Assembly’s Finance, Revenue and Bonding Committee, which in the next few weeks will endorse a measure “that could launch a top-to-bottom analysis of how Connecticut taps taxpayers’ wallets.” Mr. Cibes testified that “high property taxes are a major reason why Connecticut’s tax system is broken. So property tax relief would lessen the economic burden on businesses, municipalities and individuals… Property taxes are relatively stable. But when a state relies excessively on property taxes to fund important services like education, infrastructure and public safety, businesses and individuals are punished.

Mr. Cibes’ statement was remarkably similar to an earlier Op-Ed piece printed in CTMirror written by John A. Elsesser, the town manager of Coventry: “The good thing about property taxes is that they are relatively stable. As part of an overall revenue structure, which is relatively balanced among taxes on property, sales and income, they make sense. But when a state relies excessively on local property taxes to fund governmental services, as does Connecticut, it’s reasonable to begin working to fix what House Speaker Brendan Sharkey has termed a ‘broken’ tax system.”

Mr. Cibes and Mr. Weicker were both prime movers in the effort to adopt an income tax. While campaigning for governor, former Republican U.S. Senator Weicker, running within a party of his own making, had eschewed an income tax as a means of liquidating a Democratic generated billion dollar deficit. Adopting an income tax, gubernatorial campaigner Weicker said, would be “like pouring gasoline on a fire.” Mr. Cibes had run for governor on an income tax platform, but he and his platform were decisively rejected at the time by 65% of Democrats.

While Connecticut’s income tax was muscled through the General Assembly by Governor Weicker, the income tax idea and its implementation originated with Mr. Cibes, whom Mr. Weicker tapped to head the state’s Office of Policy Management. Declining to run for a second term as governor, a grateful Weicker, before leaving office, created a plush featherbed for Mr. Cibes, appointing him the first Chancellor of Connecticut’s new Connecticut State University System. Like old soldiers, old political operatives never die, but neither do they fade away. They become associated with lobbying firms or pad their retirements with pensions drawn from tax dollars.

It should surprise no one, least of all the editors of CTMirror, that Mr. Cibes continues to insist that Connecticut is undertaxed. Mr. Cibes certainly is within easy reach of the reporters and editors of CTMirror. Mr. Weicker’s former OPM chief was one of the co-founders of CTMirror and serves on its board of directors, as does Stanley Twardy, former Chief of Staff for Mr. Weicker. According to a report in Raising Hale, CTMirror is published by Connecticut News Project. A review of political contributions by board members of CTMirror shows that eight of the ten board members have made donations to political candidates totaling more than $125,000, seventy five percent of which enriched Democrats.

The Weicker-Cibes income tax of 1991 dropped the sales tax rate from 8% to 6% and the corporate tax rate from 13.8% to 11.5%. A Rainy Day tax fund, since depleted by spendthrifts in the General Assembly, was also introduced, along with a largely irrelevant constitutional expenditure cap. Through inadvertence or design, the Democrat dominated General Assembly never quite got around to implementing the constitutional cap and, following the passage of the Weicker-Cibes income tax, spending in the state tripled within the space of three governors, two of whom were Republicans.

Mr. Cibes’ pitch on the necessity of tax increases sounds wearily familiar, especially coming on the heels of Governor Dannel Malloy’s massive tax increase, the largest in state history, which out-revenued even the Weicker-Cibes income tax.

Commending a plan put forward by “Better Choices For Connecticut”, progressive tax grabbers, Mr. Cibes argued a few years ago in his pitch for higher taxes that Connecticut could not possibly offset its deficit through spending reductions alone, and he called for a “fair share’ sacrifice on the part of taxpayers and tax gobblers, a motif candidate for governor Dannel Malloy deployed effectively in his campaign.

The revenue proposals promoted by “Better Choices For Connecticut” and embraced by Mr. Cibes included an increase in the income tax for “those who can best afford it,” likely anyone making more than $250,000 per year, an increase in corporate taxes and an increase in the sales tax. The corrective measures promoted by Mr. Cibes insert progressive features into the Weicker-Cibes income tax, considered by some when it was passed as insufficiently progressive. At the time of passage, Mr. Cibes had told the New York Times that the architecture of the tax made it more progressive than it seemed. But progressives believe you can never have enough of a good thing.

Once the new revenue proposals are imposed on the Weicker-Cibes income tax, Connecticut will have adopted the same tax scheme Mr. Cibes promoted when he ran for governor way back in 1991. Property tax relief is little more than a convenient cover that will allow progressive Democrats to boost taxes when, after the upcoming elections, the state once again finds itself confronting a $2 billion deficit brought on by exorbitant spending. And the reporters and editors at CTMirror are too bright not to have noticed the obvious sham. One can only conclude that in failing to report sufficiently on one of its board of directors, CTMirror did not wish to place before its readers such inconvenient truths as might disturb Mr. Cibes and others who financially support the Connecticut News Project.

Welcome to 1991. Is It The Revolution Yet?

 

In 1991, then Governor Lowell Weicker was facing a stubborn billion dollar deficit that had been left on his doorstep by retiring Democratic Governor William O’Neill, an opponent of a state income tax that had first been publically proposed by Bill Cibes in a Democratic Party primary.

Running for the Democratic Party nod against Bruce Morrison, Mr. Cibes argued that the deficit and Connecticut’s parlous economic climate made it impossible for the state to raise the sales tax, then among the highest in the nation, or business taxes. An income tax was inevitable. ''The public,” Mr. Morrison retorted, “should beware of people who want to increase their taxes and call it reform.”

Mr. Cibes lost the primary – no surprise, really, since most Democrats from time immemorial had been income tax averse – and Mr. Weicker won 40 percent of the vote on Election Day, defeating both Republican John Rowland, who hauled in 37 percent of the vote, and Mr. Morrison. Although Mr. Weicker lost Fairfield and New Haven counties, he received strong support from the Hartford metro area after having been robustly endorsed by the Hartford Courant and state employee labor unions, according to an account in the New York Times.

Following his ascension to the governor’s office, Mr. Weicker brought Mr. Cibes on board as his Office of Policy Management (OPM) chief. Mr. Cibes then laid before the new governor the budgetary bad news, which instantly converted Mr. Weicker from an anti to a pro income tax fundamentalist  Elmer Gantry. On the way to instituting an income tax, Mr. Weicker had to step over an imposing hypocrisy bar, having insisted, along with all the other candidates running for governor that year save Mr. Cibes, that instituting an income tax, given the state’s dour economic condition, would be “like pouring gas in a fire.”

Shortly after the income tax bill passed into law, more than 40,000 protestors appeared at the state capitol demanding the tax be axed. The General Assembly obliged by passing a measure repealing the tax, which was vetoed by Mr. Weicker. The veto override fell one vote short of passing, and the income tax became a permanent feature of Connecticut life. To make the tax palatable to dubious legislators, a constitutional spending cap was attached to the final bill. In a dubious arrangement with the tribes, Weicker persuaded the Indians to surrender a portion of their slot earnings in return for a monopoly on gambling in the state, a protection racket reminiscent of Al Capone’s Chicago minus the machine guns.

Fast forward to Governor Dannel Malloy’s first term. Other governors have danced agilely around Connecticut’s inconvenient Constitutional spending cap. The constitutional spending cap specifies:

“The general assembly shall not authorize an increase in general budget expenditures for any fiscal year above the amount of general budget expenditures authorized for the previous fiscal year by a percentage which exceeds the greater of the percentage increase in personal income or the percentage increase in inflation, unless the governor declares an emergency or the existence of extraordinary circumstances and at least three-fifths of the members of each house of the general assembly vote to exceed such limit for the purposes of such emergency or extraordinary circumstances.”

This spending stop sign has not prevented the state’s governmental apparatus from increasing spending threefold since it was instituted, although both inflation and personal income have remained flat during the same period. As a practical matter, largely because the General Assembly has yet to implement the constitutional law by providing necessary definitions, the constitutional cap is a spending compliant pussy cat. The Malloy administration and the Democratic dominated General Assembly this year breezed through the stop sign traveling at warp speed when both decided to remove $6 billion cap counted dollars from the strictures imposed by the state constitution.

The parallels between the Malloy and Weicker administrations are too obvious to ignore. Both governors raised taxes to discharge deficits; the Malloy tax increase is the largest in state history. The niggling little tax increases that the Weicker tax was supposed to ameliorate returned with a vengeance in Mr. Malloy’s first budget. Spending cuts in both administrations were doubtful and minimal. Mr. Weicker steered a course around Republicans and moderate Democrats to enact his tax increase, the second largest in state history. Mr. Malloy tossed Republicans from the room when he negotiated his budget, pre-approved by the General Assembly, with tax hungry unions. Mr. Weicker relied on state unions to get elected; Mr. Malloy relied on the same bunch to shape his budget. Both the Weicker and Malloy budgets were union friendly.

The Weicker recession that followed the imposition of his income tax lasted about 10 years. The Malloy recession, joined now to a national recession, will be more perdurable, even though the Malloyalists and progressives in the General Assembly remain giddily optimistic that Connecticut’s recovery will be swift and long lasting. The $6 billion the Malloy administration removed from the provisions of Connecticut’s constitutional cap should allow the Malloyalists to continue their improvident spending through the next elections. After that – who cares?

The Vozhd

The budget submitted by Governor Dannel Malloy to the Democratic dominated General Assembly and approved by the legislature – although a pending deal between Mr. Malloy and state union workers requiring union givebacks of $1.6 billion had not been affirmed by the unions at its passage – is best seen as the inevitable political end piece of the first Weicker budget.

The presumptions underlying Governor Lowell Weicker’s 1991 budget parallel Mr. Malloy’s. Indeed, the two budgets, as well as the political maneuvering involved in passing them, are nearly mirror images.

Mr. Weicker’s campaign for governor featured rather dramatic suggestions that he would not resort to an income tax to liquidate a large state debt. Similarly, Mr. Malloy several times during his campaign with Republican gubernatorial nominee Tom Foley suggested that an increase in taxes would be a last resort for him.

Instituting an income tax, Mr. Weicker said at the time, “would be like pouring gas on a fire.”

Upon being elected governor, Mr. Weicker chose as his Office of Policy Management chief Bill Cibes, a pro-income tax proponent who had run for governor on an income tax platform. Mr. Cibes had been soundly defeated. Before anyone could cry “Fire” in Connecticut’s crowded political theatre, Mr. Weicker, breaking arms and shoving pencils into the eyes of wavering anti-income tax legislators, set Connecticut ablaze with a new, relatively flat income tax. Mr. Malloy did not deign to allow Republicans to shape his budget, and his tax increase was larger than Weicker’s.

Spendthrifts in the General Assembly, most but not all of them Democrats, then and there pledged to make Mr. Weicker’s income tax more progressive. A progressive feature, finally added in the waning days of the Rell administration, has been improved by the Malloy administration. Governor Jodi Rell, the last Republican governor before the advent of Mr. Malloy, lampooned as “Snow White” by her Democratic opponents and the usual cheering section of Connecticut’s left of center media, was never a match for Machiavellian Democrats in the General Assembly. Looking backward from the vantage point of the Malloy administration, Mrs. Rell may be viewed as the last Republican cork in the bottle of a once fissiparous but now united Democratic Party. Mr. Malloy is the first Democratic governor elected in the Connecticut since former Governor William O’Neill departed the state more than 20 years ago, leaving in his wake a deficit of about $1 billion. In the post income tax era, the deficit has tripled, the budget has tripled, and the total liability straddling the state is about $68 billion. All of this is the result of the inability of the Democratic Party’s progressive wing to cut spending.

“We all want progress,” C.S. Lewis said. “but of you’re on the wrong road, progress means doing an about turn and walking back to the right road; in that case, the man who turns back soonest is the most progressive.”

Asked some time ago whether he feared the consequences of a one party state, Don Williams, the progressive state Senate President, retorted that such fears were overblown; the one party state gets things done.

It is not known whether Mr. Williams is a student of Italian fascism, but he clearly admires the oomph behind it as expressed in Mussolini’s definition of fascism: “Everything in the state; nothing outside the state; nothing above the state. And by “the state,” of course, the guy who made the trains run on time meant a one party governing power.

For all practical purposes, Connecticut is now a one party, progressive state – with a progressive income tax, a means of passing on the tax burden, rather than sharing it, to anyone who makes over $200,000 a year. Republicans this year exercised no influence in shaping Mr. Malloy’s union driven budget.

Following the passage of Connecticut’s budget, the New York Times, the editorial board of which is simpatico with Mr. Malloy, modestly pronounced Connecticut’s budget session “the most activist, liberal legislative session in memory.” As tokens of Mr. Malloy’s abundant liberalism, the Times mentioned that the governor worked with the General Assembly to “enact the largest tax increase in state history and approved the nation’s first law to mandate paid sick leave for some workers. The legislators voted to extend protections for transgender people, to charge in-state college tuition rates to illegal immigrants, to extend an early-release program for prisoners and to decriminalize possession of small amounts of marijuana.”

The Sunday following the adoption of Mr. Malloy’s budget by the Democratic controlled General Assembly, The Hartford Courant, Connecticut’s only state wide newspaper, tooted the governor’s horn in an editorial, “Going The Governor's Way: One-Party Rule Empowers Malloy.”

The paper clearly admires Mr. Malloy’s force and focus, even as it admired, without much attention to the direction of such force and focus, the same qualities in Mr. Weicker. It declares that if unions agree to the rather inconsequential, temporary sacrifices Mr. Malloy has asked of them in his budget plan, the governor will have “fixed the biggest budget deficit the state ever faced,” a doubtful proposition. Connecticut’s continuing budget deficits are the result of overspending, and spending has not been aggressively attacked in the Malloy budget, which freezes the wages of state union members for two years, thereafter increasing wages by three percent for the following four years. The Malloy budget contractually forestalls layoffs for four years and restricts “shared sacrifice” only to state union members. The shared sacrifice of taxpayers under the Malloy budget will be permanent; spending giveback from unions will be temporary. The state’s largest budget deficit in history has been “fixed” mostly by relying upon the state’s biggest tax increase in history, larger even than the increase that followed Mr. Weicker’s imposition of an income tax.

Republican gubernatorial candidate Tom Foley, who lost to Mr. Malloy, has not entirely disappeared. And, as might be expected, his assessment of Mr. Malloy’s “shared sacrifice,” differs markedly from the state’s left of center media. “The facts are clear and simple,” said Mr. Foley. “Spending in the general fund is budgeted to go up next fiscal year by over $450 million, an increase of 2.5 percent over this year. The governor's ‘deal’ with state workers' unions includes no reduction in either the number of state workers or the overall cost of the state workforce. Gov. Malloy and the Democratic majority are closing this entire budget deficit with increased taxes amounting to more than $2.5 billion.”

The Courant admires Mr. Malloy’s audacity:

“He's rammed through audacious projects, including a nearly $900 million expansion of the University of Connecticut Health Center that could make the state a powerhouse in bioscience research and production.”

The operative word in that last sentence is “could.” Pouring nearly a billion dollars into such a doubtful proposition as the UConn Heath Center could, as easily, be throwing good money after bad, and the health center’s record in this respect suggests that the institution may not be salvageable at any price; its had been bailed out numerous times in the past, and throwing money in its direction has been an exercise in futility.

In a time of scarce tax resources – not even the audacious Mr. Malloy can press water from stones – Mr. Malloy has proposed a budget in which the problems he has temporarily settled by a shared sacrifice that weighs heavily on tax payers and lightly on tax consumers will almost certainly recur in a more virulent form later.

One of the most glaring, unaddressed political problems facing this and preceding governors is centered in the schedules that determine contract negotiations between Connecticut’s governors and bargaining units. Union contracts expire at different dates, which shifts the negotiation advantage from the governor’s office to union negotiators. Like the weather, all Connecticut governors have complained about it, but complaints do not change the weather.

Suppose, just to suppose, that an audacious governor and an enlightened General Assembly were to arrange matters so that all state contracts were to expire on the same date and hour. In that circumstance, contract negotiations between the executive department and unions could conclude in a more timely manner, which would give to the executive and legislative departments an advantage in negotiations they do not presently enjoy. The arrangement would more easily make shared sacrifice politically possible. Under the present arrangement – this year, the Malloy administration, working in concert with Democrats in the General assembly, pre-approved the budget without the certainty of union give backs -- both the governor and the General Assembly are held hostage to a process that gives union negotiators the upper hand in determining the final shape of the state’s budget.

The telling consequences of Mr. Malloy’s focused and forceful approach to government all lie in the future. And the preeminence of legislators and governors in a democracy over union negotiators may merit serious attention as Connecticut drifts effortlessly toward Mr. William’s utopian one party state.

The Dannel Malloy State Employees Bargaining Agent Coalition Complex

There is no termination date on the tax increase contract between taxpayers and the Malloy administration – because there is no written contract.

Some of the items in the contract to be signed by the State Employees Bargaining Agent Coalition (SEBAC), the state union coalition negotiating contracts with Governor Malloy, do have a termination date. For instance, the salaries of state union members, frozen for two years, will unfreeze thereafter and increase by 3% during the following three years.

In such precarious times, it must be liberating for state workers to know that the “shared sacrifice” of salary givebacks has a termination date affixed to it. Actuaries hired by the Malloy administration tell us that the temporary salary freeze will save the state $ 448,402,275, according to a budget fact sheet given out to the state’s media. Because the freeze terminates after two years, the savings to the state is itself temporary, while the salary increase of 9% over three years will be permanent. Other actuarial figures supplied by the Malloy administration may be soft because the times in which we live are a’ changing -- almost daily.

Not so with the tax increase portion of Mr. Malloy’s “shared sacrifice.” The $1.8 billion tax increase, the largest in Connecticut’s history, will permanently dredge dollars from taxpayer’s increasingly depleted resources. There is no such thing within the living memory of any member of the General Assembly, including the long memory of the 86 year old Sen. Edith Prague, as a temporary tax or a temporary tax increase, and it certainly is cold comfort to reflect that the federal income tax at its inception was a two percent levy on millionaires – real millionaires. The income tax now is paid by proletarian waitresses at the local diner.

And, of course, other taxes have gone up. Connecticut’s new budget reduces the threshold on estate and gift taxes; raises the income tax retroactively to January 1, 2011 on individuals with taxable income over $50,000 and joint filers whose income exceeds $100,000; slaps an Amazon tax on internet sales, increases the number of tax brackets from 3 to 6 and imposes a 20% surcharge on corporations for 2012 and 2013.

While Mr. Malloy has suggested that unions accept his budget and blame him for the sacrifices he is asking unions members to make, not all the members of unions presently negotiating contracts with the Malloy administration are sanguine, according to a recent Associated Press report:

“Despite the promise of no layoffs for four years, three years of wage increases following a two-year freeze and the continuation of coveted benefits such as pensions, retiree health care and longevity bonuses, there's skepticism and leeriness about the deal among many of the state's 45,000 unionized workers. Some want promises that big businesses and wealthy taxpayers will be asked to pay more if they agree to givebacks. Some simply want to see the details.”

An attempt by the Malloy administration to unveil the details of the Malloy-SEBAC deal to Connecticut’s media at Rentschler Field in East Hartford met with mixed success. Noting that the budget falls about $400 million short of projected expenditures, editorial departments of some newspapers wanted to see the actual rabbit drawn from the hat at the conclusion of union negotiations before they bestowed their blessing upon a tax increase even larger than that imposed in the 1991 Weicker budget, which featured Connecticut’s new state income tax.

Almost no one but committed leftists and boilerplate union demagogues are encouraging Mr. Malloy to conduct further raids on the profits of Connecticut businesses, some of which already have picked up stakes and moved all or part of their operations to more business friendly environments elsewhere. It turns out that “elsewhere” – at least in the case of Precision Camera And Video, Pfizer and Yardley Technical Products http://donpesci.blogspot.com/2011/05/dannel-in-wonderland.html is across the border into nearby states. As an additional bump out the door, Connecticut has slapped a corporation surcharge on homegrown businesses that have not yet explored alternative sites in, say, New Hampshire, a state that – lacking a Weicker or a Bill Cibes to jam an income tax proposal through its legislature – maintains its low tax, low regulatory status. Of the nine states without income taxes, all but one, Alaska, saw more people migrating in than out from 2000 to 2008. Connecticut has been losing population to other states ever since it adopted its income tax.

Any lesson that may be gleaned from such data is certain to be lost on a Democratic controlled General Assembly and governor poised to push through the legislature a bill fervently supported by the redundant Connecticut Working Party, little more than an annex of the Democratic Party,
that would require companies with more than 50 workers to provide up to five sick days a year for employees and new hires who had put in 520 hours on the job.

Nice work -- if you can get it.