"We can tax the millionaires in Washington and we can make Connecticut a better place for working families” – 5th District Democratic U.S. House candidate Chris Donovan
"Don't tax you, don't tax me. Tax the guy behind the tree"—Russell Long
Even the most progressive politician of his day, Russell’s father Huey Long, knew the scheme wouldn’t work; but it was a winner as a populist campaign pitch. Within the Democratic Party of his day, Russell was acknowledged as an authority on tax law. As such, he became an ardent advocate of tax breaks for business. “I have become convinced,” said Russell, most certainly not a chip off his father’s progressive block, “you're going to have to have capital if you're going to have capitalism."
One suspects that progressive leader of the state House of Representatives Chris Donovan knows this. However, the deathless scheme, endemic in the Democratic Party, to convince the tax paying public that someone may be found – perhaps hiding behind a tree in Washington – to pay debts incurred by reckless politicians marches on and on and on.
Even Governor Dannel Malloy, who styles himself a progressive, focused in his first budget on broadening the tax base. A revenue stream that depends chiefly on the ups and downs of Wall Street fed millionaires, a great number of whom in Connecticut are hedge fund managers, is doomed to fail. There are, in Connecticut and the nation, too few millionaires chasing too many debts.
Mr. Donovan is one of three Democrats vying for the seat in the U.S. House of Representatives soon to be left vacant by U.S. Rep. Chris Murphy, who has set his sights on U.S. Senator Joe Lieberman’s soon to be vacant seat. Former state representative Elizabeth Esty, whose husband Daniel was appointed Commissioner of the Connecticut Department of Energy and Environmental Protection (DEEP) by Mr. Malloy last and Daniel Roberti are also announced candidates. On the Republican side of the barricades, Justin Bernier, a member of former Governor Jodi Rell's cabinet who ran for the seat in 2010, Mike Clark, chairman of the Farmington Town Council and a former FBI agent, businesswoman Lisa Wilson-Foley, businessman Mark Greenberg, who also ran in 2010, and state senator Andrew Roraback are campaigning for the seat.
Most Republicans running for office who have some personal experience with business are familiar with the principle underlying business flight, which may be stated as follows: Whatever you tax tends to disappear. If you tax millionaire hedge fund operators who live in Fairfield’s Gold Coast, both hedge fund businesses and its employees will leech out of the state in search of more favorable profit margins elsewhere. Mr. Malloy has been known to worry in public that Connecticut’s neighboring states would benefit from exorbitant taxes on hedge fund millionaires, however popular and politically beneficial the prospect of taxing millionaires might be to progressive politicians. Like water, businesses flow from high cost to low coast states, and taxes are one of the controllable components of the cost of doing business.
Mr. Donovan favors taxing millionaires to pay for a budget that has increased threefold since the last Democratic governor in Connecticut, William O’Neil, held office. And it is quite simply an exercise in futility to point out to him that the state is not suffering from a revenue problem. The threefold increase in state spending within a little more than two decades is undeniable proof that the state is suffering from a spending problem the present Speaker of the State House of Representative has no interest in addressing.
The same principle of disappearing opportunities applies to politically inspired increases in the minimum wage, a populist measure supported by Mr. Donovan, whose ambition it is to propel Connecticut into first place among states that impose the highest minimum wage. Beyond a certain level, the minimum wage forces companies that cannot afford it to cut back on employment or go out of business. Costly boosts in the minimum wage affects only those employers whose profit margins are slight. Capital rich mega-companies will be able to absorb Mr. Donovan’s impositions, but these are not companies that hire workers who have in the past been paid the kind of wages Mr. Donovan hopes to boost through his minimum wage legislation.
People with little or no working history are those most likely to be adversely impacted by Mr. Donovan’s bill. Low income workers and teenagers in blighted urban areas who hope to place their feet on the bottom rung of the ladder of success will find that the rungs have been hacked off by legislators in a Democratic dominated General Assembly who for reasons of political expedience had yielded to Mr. Donovan’s anti-business ideology.
A business that might hire a child of the city making his way valiantly and honorably through circumstances Mr. Donovan little understands needs capital to pay his workers’ wages. Mr. Donovan has yet to be convinced that you cannot have capitalism without capital. If he succeeds in making his way to the U.S. House of Representatives in Washington, home of the magic money tree, it is possible he may never learn what children of the city already know: When the profit margins of businessmen who are likely to hire them is reduced, the prospect of their being hired is proportionally reduced.
Showing posts with label Russell Long. Show all posts
Showing posts with label Russell Long. Show all posts
Sunday, March 4, 2012
Tuesday, December 28, 2010
What “A Spending Problem” Means
Russell Long of Louisiana, son of the more notorious Huey Long, is famous for having said, “Don’t tax you, don’t tax me. Tax that fellow behind the tree.”
Mr. Long was no stranger to tax laws, having served as Chairman of the Senate Finance Committee for several years from 1966 to 1981, after which Republicans assumed control of the Senate. The prominent Democrat was an unashamed proponent of tax breaks for businesses. “I have become convinced,” he once said, “you’re going to have to have capital; if you’re going to have capitalism.” At the same time, he was somewhat wary of “tax reform” which, to his way of thinking, involved a certain amount of political subterfuge: “Don’t tax you, don’t tax me. Tax that fellow behind the tree.”
In Connecticut, the fellows behind the tree are thought to be capitalists “millionaires” earning more than $250,000 per year, most of them quartered in what we have come to call the “Gold Coast.” It is no surprise that “millionaires” in the United States have been down graded since the sixteenth amendment establishing the tax was ratified in 1913, at which time the top tax rate was 7% on incomes above $500,000, about $10 million in 2007 dollars. During World War I, the top rate rose to 77% while the income threshold that deposited millionaires in the top bracket rose to $1,000,000 or $16 million in 2007 dollars. Following the war, the top rate was reduced to 24% and the income threshold for paying this rate fell to a low of $100,000 or $1 million in 2007 dollars. But over time the tax was more broadly levied to include the proletariat. Begun as a tax on millionaires and multi-millionaires, the income tax eventually ended as a tax on pastry cooks and hairdressers. We are the future mysterious fellows behind the tree.
Almost everyone in state government, with the possible exception of Speaker of the House Chris Donovan, has now become convinced that Connecticut has a spending and not a revenue problem. Such was the buried assumption in most Democratic campaigns in this the winter of our discontent.
On Sunday the Hartford Courant, whose editorial page editors several years ago reminded us that the state had a "revenue not a spending problem," repented in sackcloth and ashes, courageously advising legislators in a sprawling 1,400 word editorial, “Agenda: For The State” to -- STOP SPENDING MONEY.
For added emphasis, the paper quoted former Governor and Senator Lowell Weicker, father of the state income tax and a notorious revenue raiser:
Key to understanding the obvious and direct correlation between getting and spending is this golden perception: If you don’t tax it, you can’t spend it.” Its destructive corollary is: If you “solve” a spending problem by raising new revenue, it will not be long before the revenue is spent, producing – this is not rocket science – more debt and, shortly following, more and higher revenue increases. This is how dangerously red permanent budget holes are dug. Given the dialectic “more revenue raising leads ineluctably to more spending,” one may question whether Mr. Weicker’s solution “solved” the state’s deficit, which today is many times larger than it was during the first golden days of Mr. Weicker’s one term administration. When Connecticut’s editorial pontificators grasp the causal connection between getting and spending, their conversion may be complete.
The sorrowful truth is that Connecticut has run out trees behind which may be found mythical taxpayers. The recklessly destructive spending spree that followed the Weicker income tax, and the bottomless abyss of federal spending that has followed the current deep recession, have emptied the forest of hiding spots: There is no painless way to spend money and hand off the bill to the quarter-millionaires Donovan and others suppose will pay it.
Connecticut’s state debt, not counting the state’s massive pension liability, amounts to about $3.5 billion for each of the next three years, which means that Connecticut must reduce its spending by a like number – PERMANENTLY.
But the prospect of permanent reductions in spending have had in the past the same effect upon leaders in the state’s Democratic caucus that water had on the wicked witch of the West in The Wizard Of Oz. And it is very much an open question whether Governor-elect Dan Malloy can convince such leaders as Donovan that the dissolution of the state awaits those who lack the necessary mental and emotional skill set to appreciate the problem and its ONLY sound solution -- STOP SPENDING MONEY.
Mr. Long was no stranger to tax laws, having served as Chairman of the Senate Finance Committee for several years from 1966 to 1981, after which Republicans assumed control of the Senate. The prominent Democrat was an unashamed proponent of tax breaks for businesses. “I have become convinced,” he once said, “you’re going to have to have capital; if you’re going to have capitalism.” At the same time, he was somewhat wary of “tax reform” which, to his way of thinking, involved a certain amount of political subterfuge: “Don’t tax you, don’t tax me. Tax that fellow behind the tree.”
In Connecticut, the fellows behind the tree are thought to be capitalists “millionaires” earning more than $250,000 per year, most of them quartered in what we have come to call the “Gold Coast.” It is no surprise that “millionaires” in the United States have been down graded since the sixteenth amendment establishing the tax was ratified in 1913, at which time the top tax rate was 7% on incomes above $500,000, about $10 million in 2007 dollars. During World War I, the top rate rose to 77% while the income threshold that deposited millionaires in the top bracket rose to $1,000,000 or $16 million in 2007 dollars. Following the war, the top rate was reduced to 24% and the income threshold for paying this rate fell to a low of $100,000 or $1 million in 2007 dollars. But over time the tax was more broadly levied to include the proletariat. Begun as a tax on millionaires and multi-millionaires, the income tax eventually ended as a tax on pastry cooks and hairdressers. We are the future mysterious fellows behind the tree.
Almost everyone in state government, with the possible exception of Speaker of the House Chris Donovan, has now become convinced that Connecticut has a spending and not a revenue problem. Such was the buried assumption in most Democratic campaigns in this the winter of our discontent.
On Sunday the Hartford Courant, whose editorial page editors several years ago reminded us that the state had a "revenue not a spending problem," repented in sackcloth and ashes, courageously advising legislators in a sprawling 1,400 word editorial, “Agenda: For The State” to -- STOP SPENDING MONEY.
For added emphasis, the paper quoted former Governor and Senator Lowell Weicker, father of the state income tax and a notorious revenue raiser:
“’The spending cuts have to come, and they have got to be huge,’ says former Gov. Lowell P. Weicker Jr., who solved the state's billion-dollar deficit 20 years ago by instituting a state income tax. ‘It certainly has been spent,’ he says."
Key to understanding the obvious and direct correlation between getting and spending is this golden perception: If you don’t tax it, you can’t spend it.” Its destructive corollary is: If you “solve” a spending problem by raising new revenue, it will not be long before the revenue is spent, producing – this is not rocket science – more debt and, shortly following, more and higher revenue increases. This is how dangerously red permanent budget holes are dug. Given the dialectic “more revenue raising leads ineluctably to more spending,” one may question whether Mr. Weicker’s solution “solved” the state’s deficit, which today is many times larger than it was during the first golden days of Mr. Weicker’s one term administration. When Connecticut’s editorial pontificators grasp the causal connection between getting and spending, their conversion may be complete.
The sorrowful truth is that Connecticut has run out trees behind which may be found mythical taxpayers. The recklessly destructive spending spree that followed the Weicker income tax, and the bottomless abyss of federal spending that has followed the current deep recession, have emptied the forest of hiding spots: There is no painless way to spend money and hand off the bill to the quarter-millionaires Donovan and others suppose will pay it.
Connecticut’s state debt, not counting the state’s massive pension liability, amounts to about $3.5 billion for each of the next three years, which means that Connecticut must reduce its spending by a like number – PERMANENTLY.
But the prospect of permanent reductions in spending have had in the past the same effect upon leaders in the state’s Democratic caucus that water had on the wicked witch of the West in The Wizard Of Oz. And it is very much an open question whether Governor-elect Dan Malloy can convince such leaders as Donovan that the dissolution of the state awaits those who lack the necessary mental and emotional skill set to appreciate the problem and its ONLY sound solution -- STOP SPENDING MONEY.
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