Politics & Policy

Excise-Tax Hell

Out-of-control Republicans in Connecticut.

Much of the recent media coverage of Connecticut politics has focused on deposed Gov. John Rowland’s sentencing for his role in a corruption scandal. But taxpayers in the Nutmeg State should be on guard once again: Rowland’s Republican successor is about to sentence them to the economic equivalent of solitary confinement.

Rowland — who at one time had a reputation as a fiscal conservative — teamed up with his state legislature repeatedly to make life tougher for residents. The income tax rate in the waning years of Rowland’s floundering administration rose from 4.5 percent to 5 percent for most filers and the tobacco tax shot up from 50 cents per pack in early 2002 to $1.51 per pack in 2003. During his last three years in office, Rowland signed $900 million in tax hikes into law, thus solidifying the state’s status for having the heaviest per capita tax burden in the nation. In fact, a remarkable 33 percent of the average Connecticut citizen’s income goes to pay taxes.

Now, Gov. M. Jodi Rell wants to tack another 74 cent increase onto the state’s cigarette tax, pushing Connecticut’s rate to an astounding $2.25 per pack. That rate would be among the highest of any state in the nation. Rell has also chosen to continue her predecessor’s tax-hiking ways on other fronts. She seeks a 15 percent boost in beer, wine, and liquor taxes and a huge hike in taxes on other tobacco products (including snuff or smokeless tobacco) from 20 percent of wholesale to 90 percent. This combined “sin tax” package, a fiscal sin in its own right, would cost taxpayers approximately $112 million annually. To top it all off, the new governor has proposed raising the state’s gas tax at a time when prices are higher than ever.

Complementing Rell’s proposed sky-high cigarette tax with a gas-tax rate among the highest in the country would cement Connecticut’s status as an “excise tax hell.”

Of course, Democrat hands are not clean in any of this. When it comes to raising taxes in Connecticut, Democratic legislators would burden the state’s most productive citizens with significantly higher income taxes. One plan would increase the rate from 5 percent to 5.5 percent for single filers earning $133,800 or more a year and joint filers earning $250,000 or more. For single filers earning over $1 million and joint filers earning more than $2 million, the rate would be even steeper at 6.25 percent.

Since abundant economic research has shown that income taxes — especially steeply progressive ones — are the single most economically harmful form of taxation, the Democrat plan would only hasten the exodus of productive workers and increase the likelihood of the state losing yet another seat in Congress in 2010.

Connecticut cannot continue increasing the tax burden on its citizens indefinitely. Instead of picking the pockets of Connecticut taxpayers time and time again, Hartford must tighten its belt and reduce spending. Unfortunately, tax-and-spenders in the governor’s office have caused the states’s economy to struggle. In response to a 2004 study by the New England Economic Partnership that indicated years of slow job growth were ahead for the state, New Haven Mayor John DeStefano, Jr., admitted that cities like New Haven have “struggled for years, losing jobs during national recovery years such as 2003.” Although the mayor went on to cite inadequate economic-development assistance from the state, the elephant in the room is clearly Connecticut’s out-of-control tax policy.

Rather than raising taxes every time the budget slides into the red, state policymakers should consider a broad array of public-private partnerships and private contracting that could be used to provide government services at a lower cost. Equally important — if it is not too late to rein in Connecticut Republicans — Gov. Rell should take a serious look at ways to prioritize government programs within the budget and actually work to lighten the load on taxpayers. Sooner or later, the tax hiking has to stop.

Paul J. Gessing is director of government affairs for the National Taxpayers Union.

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