Conn. Governor Seeks Higher Taxes on Income, Cigarettes

Published May 1, 2007

Less than three months after she was elected last November on promises to lower taxes, Connecticut Gov. M. Jodi Rell (R) proposed a $3.4 billion hike in the state’s income tax and a hike in taxes on cigarettes.

Under the governor’s plan, the maximum 5 percent income tax rate would climb 10 percent, to 5.5 percent. The increase would be smaller for people in lower tax brackets. Cigarette taxes would jump from $1.51 to $2 per pack.

Rell’s budget, submitted in February, includes some tax cuts, as she proposes eliminating the local property tax on cars, pickup trucks, and motorcycles.

Taxpayer advocates are skeptical about the plan, but other groups expressed willingness to consider it.

Spending Has Quintupled

“The Nutmeg State has the highest tax burden in the nation,” said D. Dowd Muska, Philip Gressel Fellow for Tax and Budget Policy at the Connecticut-based Yankee Institute for Public Policy. “Connecticut’s inflation-adjusted, per-capita spending has quintupled since 1970. Clearly, the governor’s budget is another step down our state’s well-trod path of fiscal irresponsibility.”

Patrice McCarthy, deputy director of the Connecticut Association of Boards of Education (CABE), said her group is “generally supportive of the governor’s focus, but we have concerns about a couple of the pieces of her proposal. We support her goal of investing in public education. We think there is broad support to make some increased state commitment to education in this session.”

More for Schools

Most of the additional revenue would go toward education. Rell proposes to hike state aid for daily school operations by $1.1 billion, but educators have concerns about proposed changes in the formula that doles out construction money.

The state currently pays up to 80 percent of the cost of school construction in poor communities and as little as 20 percent in affluent areas. Rell wants state school construction aid to range from 15 percent to 65 percent. She also would cut the total amount of state construction grant money by about half, to $300 million.

McCarthy said CABE’s main concern is the reduction in the state’s cost-sharing component for school construction.

“She is proposing to control state costs by reducing the sliding scale grant for construction,” McCarthy said. “If a school is about to undergo extensive construction or renovation, that would be seriously impacted by the proposal. It translates to difficulty getting the project approved at the local level” because local taxpayers would have to foot more of the construction bill.

Spending Limits Wanted

Joe Brennan, senior vice president of public policy for the Connecticut Business & Industry Association, said many of his organization’s members “have concerns that more money to municipalities won’t guarantee improvement in education or reduction in property taxes. We are talking to Governor Rell about making some changes, particularly some form of spending limitation on local governments.

“We haven’t seen the language yet, but we’re confident she will put forth a spending limitation and get at the cost-drivers,” Brennan said. “There is a lot of criticism of our binding arbitration laws [for government employees]. An arbitrator would see new money and use it to pay for higher salaries. It would not be used for property tax relief. We are working with the governor and think she is mindful of that.”

Accountability Sought

Brennan said the Connecticut Business & Industry Association values a good education but wonders about the costs and dismal results in some school districts.

“In Hartford the per-pupil cost is approaching $14,000 a year, which is a lot of money,” Brennan said. “We have a new superintendent in Hartford who has admitted the current high school graduation rate is 29 percent. When you’re spending $14,000 a person, and with the new money the governor is proposing it could be $20,000, people are saying why not just send them to private schools?

“We don’t mind spending on education, but we must have strict accountability measures to ensure property tax relief and improvement in education achievement levels,” Brennan said.

Money No Guarantee

Muska said businesses and citizens have good reason to worry about accountability.

“The governor claims her tax hike is necessary to improve education. But spending more on Connecticut’s inefficient public schools would be a mistake,” Muska said. “Education in Connecticut needs more accountability, transparency, and choice–not more tax revenue.

“For decades, research has overwhelmingly shown that throwing more money at schools does nothing to boost student performance,” Muska continued.

Muska said taxpayers should expect the promised property tax relief to be illusory.

“Runaway property taxes are not the result of insufficient revenue,” Muska said. “They are caused by state micro-management of municipal government, and local politicians who refuse to say no to public employee unions.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.