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Thursday, March 17, 2016

There's No Way To Avoid It

The state of Connecticut yesterday cut its budget by about a quarter of a billion dollars.  The reaction to this has been predictable.  Some have denounced the reduction which took funds from the "weakest members of society".  Some politicians have pointed fingers in order to shift the blame for these moves onto other people.  No one, however, wants to discuss the reason for the cuts.  After all, Connecticut raised taxes in a major way but it just did not get the revenue it projected.  The deficit that the cuts address is completely the result of lower revenues and not higher expenditures. 

So why is it that nobody talks about the reasons for the lower revenues?  Why is it that no one mentions that not only is economic growth non-existent in Connecticut but also that our population is declining.  Young people are leaving to find jobs elsewhere.  Older people are leaving to find lower taxes.  The wealthiest among us are moving to places that have no estate taxes.  (Someone who dies in Florida with twenty million dollars pays no state taxes; the estate of the same person in Connecticut would pay roughly two million in taxes.  That's a good reason to move.)

Connecticut has the unenviable combination of slow growth and high taxes.  The strange thing in this state is that there is never much discussion here about the facts that cannot be avoided:  the main reason for slow growth is high taxes, and raising taxes won't help raise revenue but will make the situation worse.  After all, why start or locate a business here when putting the same business some place else could be so much less costly?

The projections for next year's state budget show a shortfall of just under a billion dollars.  The inevitable response of the legislature and the governor will be higher taxes.  After all, next year is not and election year; that makes it prime time to once again raise taxes. 

Unless and until Connecticut wakes up and demands that taxes be cut and economic growth pushed, this sad trend is going to continue. 

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