Property Tax Regressive?

“Regressive,” as any practicing progressive knows, is the opposite of “progressive.” Theoretically, a progressive income tax is levied on those who, in the words most often used to defend the tax, can well afford to“pay their fair share,” the fairness of their share to be determined, naturally, by progressives. The sole purpose of the progressive income tax is to shift the burden of tax payments from the poor to the rich.

During the war years, Franklin Roosevelt, spurred on by progressives, signed into law the “Revenue Act of 1935,” a “wealth tax” that raised the federal income tax to 75 percent on incomes over 5 million. The 5 million, as it turned out, was but a foot in the door. Under the administrations of President Barrack Obama and Governor Dannel Malloy, millionaires have come down in the world, and anyone who makes a quarter of a million per year is considered, for progressive tax purposes, a millionaire.

By today’s standards, Mr. Roosevelt’s “fair share” would be considered unfair by anyone but socialist President of France François Hollandeand perhaps American economist Paul Krugman, one of Mr. Obama’s economic cheerleaders. Author and talk show host Chris Mathews, the guy with tingly leg, also is eupeptic on all things Obama, but he is not an economist.

In the Obama economy, some things have changed, partly because of inflation; the dollar just ain’t what it used to be. And though it takes far fewer bucks to make a millionaire, Mr. Obama’s income tax rate increase is far less than that of Mr. Hollande and Mr. Roosevelt.

When Governor of Louisiana Bobby Jindal proposed replacing his state’s income tax with an augmented sales tax, he was whipped by Mr. Krugman as an anti-progressive. “Such a move,” Mr. Krugman wrote in his blog at the NewYork Times, “would shift taxes from the rich to the poor, who are disproportionately hit by the sales tax.”

A progressive tax theoretically is a deprivation on the rich, while a regressive tax – a sales tax, say – is a deprivation on the poor. In reality, the very rich escape many taxes. When Republicans several years ago proposed a flat income tax that would fall equally on the stupendously rich Warren Buffet, the prince of Berkshire Hathaway, and his tax beleaguered secretary, while eliminating at the same time special exemptions enjoyed by crony capitalists, they were hooted out of the halls of Congress by progressive san culottes.

A property tax is progressive rather than regressive because it cannot be levied upon those whose economic circumstances to do not permit the ownership of property. The poor, as a general rule, don’t own property. Therefore, the property tax, the primary revenue generator for towns, is not unusually regressive. The sales tax, falling like the gentle rain on both the poor and the rich, is a regressive – i.e. non-progressive -- tax. It is also a broader based more dependable tax, which is probably why Mr. Jindal prefers it to the less dependable more narrow based progressive income tax.

In the halls of Connecticut’s General Assembly, it is being whispered that yet another tax increase may be necessary to balance the state’s chronically out of balance budget. The new Speaker of the House, Brendan Sharkey, has stepped forward to explain that a sluggish national economy and higher governmental costs have punched yet another billion dollar hole in the state’s revenue bucket.

And therefore the state may be forced to reduce municipal aid, Mr. Sharkey told more than a 100 state and municipal leaders and social service advocates at a state budget forum at the Capitol, which will prompt municipal leaders to raise property taxes or cut services. During his first tax bump, Mr. Malloy and dominant Democrats in the General Assembly held the towns in the state harmless. But “the days of being able to hold cities and towns completely harmless while dealing with the state's fiscal woes likely,” according to one report, “are over.”

“The property tax,” Mr. Sharkey told the property tax reliant mayors and town administrators, “will be the crisis once again.” According to the report, which summarizes the Speaker’s chat with the frozen faced municipal leaders, the Speaker went on to say, that“Besides harming low-income households the most, the regressive levy also places a heavy burden on small businesses and discourages economic development here.”

While it certainly is refreshing to hear any Democratic leader in the General Assembly frankly admit that taxes may be harmful – which is why Mr. Malloy in his first budget arranged his tax increases in such a way as to hold the towns “harmless” – the property tax certainly is not more regressive than the cornucopia of new taxes Mr. Malloy instituted, according to Mr. Krugman, the economic guru to progressives.

It is the state and federal government that has put the towns in crisis by imposing upon them costly state mandates. Town leaders do not have the political power to force the state to remove these yokes from their necks. And expensive state and federal mandates, along with poorly funded pensions and equally expensive benefit and salary increases enjoyed by teachers and municipal workers, have driven up so called “regressive” property taxes.

The chief reason why Mr. Malloy and dominant Democrats in the General Assembly are now considering voiding their often repeated pledge during campaigns to “hold towns harmless” from punishing tax increases is that the state needs the money to cover budget deficits caused by decades of improvident spending, and Democrats are loathed to punish those who consistently vote them into office by cutting increases in salaries and benefits.

Property taxes are not especially regressive. If Republicans were to propose a dollar for dollar reduction in costly state mandates for every dollar in revenue “saved”by the state in reduced municipal assistance, they just might have a useful campaign issue on their hands, for Democrats in the General Assembly fear a loss in municipal votes almost as much as they fear a temporary loss in state revenue from general and effective cuts in marginal tax rates and business taxes. Mr. Sharkey has proposed that “some of the big ticket items we impose" on communities -- funding for special education, for instance -- should be shifted to the state, but such a transfer of payments would not result in significant relief to taxpayers because municipal tax payers are also state tax payers.

Harvesting millionaires, French Expats, Malloy Snoozing

The best laid plan of Socialist French President (name) Francois Hollande (pronounced O-Lend) to tap millionaires with a 75 percent tax appears to be falling asunder.

Popular French actor Gérard Depardieu recently moved to Belgium, nearly within spitting distance of France, to escape France’s new 75 per cent top marginal income tax rate imposed on millionaires, as noted here in Connecticut Commentary.

M. Depardieu took the additional precaution of acquiring Russian citizenship, but this was intended, some suppose, to spite the lesser socialistic pretentions of M. Hollande.

Now, former French President Nicolas Sarkozy appears to be following in M. Depardieu’s footsteps. According to a piece in the UK’s Daily Mail on Line, M. Sarkozy is hightailing it to London along with his lovely wife Carla Bruni.

M. Sarkozy, said to be looking for a posh place in the city where he can strut his status, will not be the lone French expat-millionaire in England; Bernard Arnault, the luxury goods magnate and France’s richest man, also owns property in London.

While in London, M Sarkozy plans to set up a billion pounds plus investment fund.

It occurs to Connecticut Commentary that Governor Dannel Malloy has at long last – after expending much energy transferring tax dollars from middle class workers to giant multi-billion dollars companies in an attempt to bride them not to move out of Connecticut --has fallen asleep at the wheel, perhaps a good thing.

M. Malloy should get himself to France tout suite, with a view to coaxing future expat-millionaires to move to Greenwich or other safe zones in Connecticut’s Gold Coast.

Just think of the taxes the state could reap from M. Depardieu and M. Sarkosy, not to mention M. Arnault. And remember, that old millionaire trap, M. Christie, is over in New Jersey breathing heavily and, like M. Malloy, looking for every available means of discharging a deficit without further burdening the proletariat with onerous taxes for fear they might move to Texas.

No need any longer to worry about proletarian outmigration to Connecticut.

The Fiscal Cliff Aversion Bill

The Washington Post – generally not considered to be either conservative or tea party friendly – puts the hard truth bluntly in the lede to a front page story in a Hartford paper:

“Economists generally offer three theories for what’s hampering the still-sluggish U.S. economy: the Keynesian theory, which would like to see lower taxes or more government spending; the spending/debt theory, which would like to see both of those reined in; and the uncertainty theory. Under none of them can the White House-Congress deal to avert the ‘fiscal cliff’ be considered an economic success.”

And then, of course, there is your mother’s theory: “Don’t spend more than you take in, and try to tuck away a little savings for the inevitable rainy day.”

By every reasonable measure, the Obama-Congress “deal” to avert the fiscal cliff is simply an admission of failure to avert an alarmingly more dangerous real cliff waiting patiently for all of us around the next bend.

The real cliff – the yawning unfunded liabilities abyss the last few presidents and congresses have been energetically deepening over the years – is a measure of the difference between revenues and expenditures according to your Mom’s more reliable arithmetic.

Much of Europe already has taken the plunge. For the past few years, we’ve seen one after another European country drop into the deepening ditch it’s dug over a period of decades, and we’ve been flattering ourselves all the while that we are not Europe. The only European country that has not presently been hit by a double-dip recession is Germany: Greece, now in the hands of unforgiving Euro-technocrats, has toppled; Ireland has already received bailouts; Italy, Portugal and Spainare teetering on the brink; French courts have just rejected a measure by Socialist President Francois Hollande to confiscate the wealth of whatever millionaires have not yet fled the country; sovereign credit ratings throughout Europe have been slashed; and the whole of Europe – the cradle, as we used to say, of Western civilization – is quickly sinking into a mire of debt, fueled mostly by unsustainable unfunded liabilities. Here in the United States, the nation’s unfunded liabilities -- Medicare, Social Security and other outsized and menacing obligations -- do not even appear on the federal balance sheet.

The spook on a stick utilized by Mr. Obama and his fellow progressives in the U.S. Congress to stampede congressmen into voting in favor of the so-called fiscal cliff bill is a rising national debt of $15.96 trillion, more than 100% of the nation’s Gross Domestic Product (GDP), the value of everything produced in the United States during a corresponding fiscal year. These numbers, large and imposing, are but the tip of a debt iceberg. The real liabilities of the federal government, the real fiscal cliff -- including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP.

And the small bore “deal” struck between Congress and the president is but the tip of the iceberg bearing down upon us. To reduce such figures, as Mom strongly would advise, federal income must exceed federal expenditures for a long, long space of time.

When Social Security was first launched, the number of people paying into the program exceeded by a ratio of about 160 to 1 the number of people making withdrawals from the so called “trust fund,” which has entirely disappeared. In 1940, the ratio of covered workers to beneficiaries was 35,390 to 222 or 159.4; the ratio of covered workers to beneficiaries by 2010 was 156,725 to 53,398 or 2.9. Medicaid and Medicare are in much worse shape. In the long run – unless these programs are reformed -- none of them will be sustainable.

The United States finances its debt through borrowing. Since 1960, a rough consensus among both the Republican and Democratic Parties has led to a de facto fiscal policy according to which current unsustainable consumption is financed by continuous government borrowing. Profligate spending and borrowing to pay debt has hollowed out our economy. The so called fiscal cliff bill increases taxes $44 for every dollar saved in spending cuts and deepens the trench of a fiscal abyss far more precipitous and dangerous to the economy than the puny cliff surmounted by current legislation.

This is not a rational way, Mom would say, for the country to make its way back to sane solvency. Alan Simpson and Erskine Bowles, co-chairs of The National Commission on Fiscal Responsibility and Reform, former President Bill Clinton, if caught in a non-campaign mode and – this will surprise some -- John Maynard Keynes very likely would agree with Mom, who is not running for presidential office or the U .S. Congress any time soon.

Vive Depardieu

Gérard Depardieu, the French actor who moved to Belgium recently to escape the confiscatory 75 per cent top marginal income tax rate imposed on millionaires by newly elected French President  François Hollande, is at least as “French” as the Eiffel Tower. And his background suggests a proletarian upbringing.

When another of France’s sons – in fact, the richest man in the country, Bernard Arnault, the CEO and chief shareholder of the luxury behemoth LVMH – kicked the socialist dust of France from his A. Testoni Moro monk-strap shoes and moved to Belgium to escape the depredations visited upon him by M. Hollande, the first socialist President of France since François Mitterrand left office, the left wing Libération expressed its contempt for the rich in a headline on its front page: “Get lost, you rich b------.”

The san culottes socialists in France squealed their approval and secretly dreamed of guillotines.

Upon Depardieu’s leave-taking, French Prime Minister Jean-Marc Ayrault, similarly dumped on M. Depardieu, calling him a “a pathetic loser.”

The “pathetic loser” responded last Sunday with an open letter. “I was born in 1948,” M. Depardieu wrote, “I started working aged 14, as a printer, as a warehouseman, then as an actor, and I’ve always paid my taxes.” Depardieu noted that he had paid 145 million euros in tax, and to this day employs 80 people. Last year the French actor paid taxes amounting to 85 per cent of his income. “I am neither worthy of pity nor admirable, but I shall not be called 'pathetic’,” he concluded. And, now an émigré, M. Depardieu returned his French passport.

The government had been expecting the French people, traditionally distrustful of riches and on comfortable terms with discredited Marxist ideas, to heap shame upon M. Depardieu. They had seriously misjudged the temper of the people. According to a poll taken by the popular Le Parisian, nearly 70 per cent of the French populous supported M. Depardieu’s boisterous political incorrectness.

M. Depardieu has always been pleasingly irascible. Refused permission to use the loo on an Air France plane, he urinated in a plastic bottle; he’s punched a number of annoying paparazzi in various countries; and his chat about some contemporary actors has been abrasive: “She has nothing,” M. Depardieu said of Juliette Binoche. “I can’t even comprehend how she made 50 movies.”

The French admire excess: Hence the opulence of Versailles and the French Revolution, itself excessive, inspired in part as a reaction to the excesses on the monarchy.

Excess, thy name is Depardieu.  But the man, large in body and heart, unlike some politicians, is not in the least hypocritical. His drunken brawls have not led to stints in tony rehabilitation centers; he is not contrite by nature, and he would not be seen within miles of a health food store, which is to French cuisine what rat poison is to rats.

As an actor, his personality is porous. M. Depardieu has had no formal acting training, and yet he has an uncanny ability to breathe life into such disparate characters as Christopher Columbus or Reynaldo in Keith Branagh’s Hamlet, Cyrano de Bergerac on stage and screen, Rasputin and Jean Valjean. He has worked under the direction of such masterful directors as Bertolucci, Ang Lee, Godard, Resnais, Handke,Truffaut, Wajda and Weir.

When the great Polish filmmaker Andrzej Wajda left his county in 1982 for France, there to direct “Danton,” he chose M. Depardieu to play the part of Danton, a revolutionist and friend of Robespierre who truly was a man of the people, much beloved by them. During the Reign of Terror, which Danton vigorously opposed by means of a newspaper he wrote, Robespierre made arrangement for Danton’s execution. The apostle of Terror, could not permit Danton to live, for he was continually calling upon the people of France to demand their rights, given to them by the revolution itself. Wajda remained in France for six years, and when communism finally collapsed under the weight of its own internal contradictions, he returned in 1989 to a free Poland from which all the Robespierre worshipers of state power and terror had fled.

In his confrontation with the ideologically committed socialists of France, it is M. Depardieu who is playing the part of Danton; M. Hollande is his Robespierre.

 “I am leaving,” M. Depardieu wrote to his own Robespierres, Messieurs Hollande and Ayrault, “because you consider that success, creation, talent, anything different, must be punished.” His new house -- not inappropriately a remodeled customs house -- is in a small Belgian village within sight distance of France.

In time, the French will tire of their ideological frauds and give them the bum’s rush; perhaps then M. Depardieu may return home to his beloved France.

Cloutless Connecticut

Seniority equals clout in the U.S. Congress. New Senators and House members entering the portals of the U.S. Capitol are expected to be seen and not heard for their first year or so in office. Both Connecticut’s U.S. Senators are new arrivals.

Senator Richard Blumenthal, who appears to be having a problem shedding his past as Connecticut’s Attorney General, the state’s litigator-in-chief and consumer advocate, passed his first year blinking as the world slid chaotically by. With a couple of years in the Senate under his belt, Mr. Blumenthal may now be prepared to open his beak and sing a song.

Political watchers in his state are hoping the melody will not be freighted with bills he wished he had been able to enact as attorney general. The state’s soon to be Senior Senator, after a scant two years in Congress, has not favored his favorite newspapers with exhaustive opinions on a raft of recent nettlesome issues, including the destruction of the U.S. embassy in Benghazi, the murder of Libyan Ambassador Chris Stevens and other Americans, the growing U.S. deficit, the recent bombing by Israel of Hamas military emplacements in Gaza, an ordeal followed by an uneasy “peace” brokered by Egyptian President Mohamed Morsi, a Muslim Brotherhood fundamentalist who often has expressed his contempt of the West, hates Israel and wants to turn Egypt into a Salafist state, as well as other issues of moment much in the media. Perhaps after his year of sequestration Connecticut’s senior senator will be more forthcoming on, to mention just one pressure point, the economic collapse of Europe.

On the EuroZone dead zone, Reuters recently reported:

 

“Those two quarters of contraction put the euro zone's 9.4 trillion euro ($12 trillion) economy back into recession, although Italy and Spain have been contracting for a year already and Greece is suffering an outright depression.”

Connecticut’s newest U.S. Senator-elect, progressive Chris Murphy, will be forced by protocol to bite his cloutless tongue for about a year, after which the world will doubtless be his oyster.

Political science professor at the University of Connecticut Ron Schurin notes in a news story:

 

“In the next Congress, the senior senator will be Democrat Richard Blumenthal, elected to the Senate only two years ago. And its junior senator, also a Democrat, will be Chris Murphy, who is newly elected to the Senate. It's the least senior Senate delegation of any state.”

In a news conference following the recent elections,Governor Dannel Malloy noted that Connecticut’s economic future is tied inextricably to Europe’s fate. If Congress fails to reset the debt ceiling, the governor said, “with the weakness that Europe is currently demonstrating, we will see a worldwide depression.”

Republicans were perhaps thankful that the governor did not attempt to pin Connecticut’s growing post Malloy tax increase recession on Andrew Roraback, falsely reputed by his Democratic opponent, Congressman-elect Murphy, to be a Tea Party enthusiast.

 

“If we go off that cliff,” Mr. Malloy warned, “honestly, it is unthinkable." France, which elected in François Gérard Georges Nicolas Hollande (pronounced O-lend) its first socialist president since François Maurice Adrien Marie Mitterrand, the governor pointed out, is "our No. 1 trade partner."

Entering office as a snorting socialist bull, M. Hollande promised to tax rich millionaires at a 75 percent rate, but moderated his ambition somewhat, it is assumed by some fantasists in Connecticut, after having received a communique written in French from M. Malloy indicating that he, a la Governor Chris Christie of New Jersey, would be waiting at the border of Connecticut with a net to snag and relocate to Greenwich, CT French millionaire expats as they fled M. Hollande’s Bastille with their pants on fire.

Pointing out that he took over a state in financial distress during the Bush-Obama recession, Malloy said he accepted the challenge to turn the economy around.

Mr. Malloy vowed to "reshape my state -- I want to make it a better and stronger state."

To this end, Mr. Malloy told 300 credulous businessmen and women gathered at Fairfield University, he has given millions of tax dollars to a series of companies far richer than any single millionaire politician in Greenwich, with the possible exception of Mr. Blumenthal.

Such is Connecticut’s Crony capitalist future. Unlike the French in the days of Danton and Robespierre, American progressives do not lead the rich trembling in tumbrels to the guillotine; we shower upon them tax dollars wrested from the petite bourgeoisie.