Connecticut Governor M. Jodi (Bugsy) Rell, facing a dire budget surplus, and failing to get any traction on her proposals to eliminate the property tax on cars - saving tens of thousands of dollars for the average Greenwich resident and about 140 bucks for car owners in Hartford, Bridgeport, and New Haven, and a reduction in revenue for some of the poorest cities in the country (in the richest state) by millions of dollars, is again displaying her financial management skills.
Test your skill at Republican Math after the break.
Connecticut has a "flat" 5% income tax, but targeted exemptions and minimum thresholds skew it to a modestly progressive system (most households start paying taxes on the first dollar after about $45K). The Democrats in the General Assembly have begun work on adjustng the progression, with talk of increasing the tax rate to 6.95% on households making more than $250,000. Yeah, you read that right, starting with those making 250 thousand dollars. But don't fret, Rell has come rushing to the rescue of this disenfranchised underclass.
These poor bastards have been struggling to make ends meet ever since the income tax first started 16 years ago. The top two-tenths of one percent have been burdened with contributing 77% of all income tax, despite only making wages of at least $2,000,000 a year. Yes, that's right, salary and bonus of 2 million dollars. Luckily, back in 1991, in addition to the income tax, there was an adjustment in the capital gains tax (aka unearned income), a modest reduction from 14% down to 4.5%. Yes, you read that right, too. Unearned income rates dropped nearly 10 points (or 67% in Republican Math) and is now taxed at a lower rate than eligible wages. So a relatively affluent upper-middle class family with two professionals making $150,000 a year will pay about $5,000 tax on the last $100K of income from the sweat of their brow, while our downtrodden millionaire will pay $4,500 on each $100K made by the sweat of their hedge fund manager.
But that doesn't stop Governor Rell from trying to explain what dire straits these naïve innocents face. Luckily, she has the support of State Senator William H. Nickerson, (R-Greenwich), who wants us all understand that it will mean a tax increase of $45,000 on people making 2.5 million dollars. This onerous tax would eat up an additional 1.8% of their wages, stealing the Amuse Bouche and Seared Duckling right out of the mouths of their children! Of course, Mr. Nickerson doesn't put it this way, he refers to it as a 40% tax increase. Even accepting Mr. Nickerson's spun Republican Math that means these millionaires are currently paying only 4.5% (1.8/.4), not the full 5% tax. But Nickerson's use of Republican Math makes him look like a piker compared to Governor Rell.
Rell's Budget Director, Robert Genuario, says the tax increase plan is flawed, as a relatively small group of taxpayers pay a massive portion of the state's revenues. According to Genuario, a bad year on Wall Street would result in a large drop in the state's income tax collections, because the rich derive a huge portion of their income from capital gains, thus making the system far more volatile at a time Democrats are seeking a 10.4 percent spending increase (mostly for schools and aid to those poorest cities). Genuario says. "You have a situation with massive increases in spending and a shrinking tax base. It's a recipe for disaster.¹
This sounds logical, except Mr. Genuario is using that Republican Math again. Income tax revenues are based on wages and bonuses. Wall Street pays dividends. So if, in fact, Wall Street has a down year, the state's revenues will be more stable, not less. Wages are a reliable and stable source of revenue, usually only going up year in and year out. So adding a top tier of 6.95% actually guarantees the state a more reliable income stream than investment income, and shifts more of the income tax burden to the wealthiest residents.
Now Governor Rell has bolstered her legacy as one of the most inept governors in more than a generation. Add to her record as Lt. Governor her complete and total ignorance of her "good friend" and recently paroled ex-Governor John Rowland's criminal enterprise (corruption, bribe taking, etc.); her complete and total ignorance of her Chief of Staff shaking down department heads to solicit political contributions <from the Governor's office</em>, and then lying about it in legislative hearings; her use of State Police as her personal intelligence agency that targeted and arrested her political opponents for taking her picture at her inaugural parade (and coincidentally held him until after the end of the Inaugural Ball); and now we have a third blatant attempt to shift even more of the tax burden onto the (poorest) cities and the disappearing middle class (she also proposed curtailing the ability of towns to set their own taxes). Is it just me, or do I smell a "Vice Presidential candidate Rell" in our future (or is that just the Kool-Aid® she's drinking)?
Republican Math tells us that taking money out of the middle class, and redistributing it to the wealthy makes everyone more prosperous. Luckily, the Connecticut House is 107-24 Democratic and the Senate is 24-12 for the Democrats. That means anything they pass is veto proof. That's called Democratic Math!
¹Full text (though incomplete analysis) in The Hartford Courant