Windsor passed a budget in referendum May 8 that included a zero increase in taxes. Almost one fourth of the voters voted no. Last year it took 3 tries to get the bills paid and service cuts were needed to get the job done. Is the underlying concern a municipality out of control? No. The Council and Board in Windsor are very responsible caretakers responding to community priorities and needs. The real issue is Connecticut’s tax balance. Windsor like it’s 168 other local partners struggles to get the job done working in that system that really needs to work better.
The five workhorse tax categories making up the revenue portfolio -that pays the public tab at all levels - income, property, sales, corporate and others is most effective when in balance to meet needs, respond to a dynamic economy and satisfy the demographic of the payers in a fair and equitable way. Having an over reliance on any one of the taxes kicks the economy into slow speed. Raise income taxes too high and we lose top earners. Raise sales taxes too high everyone buys in neighboring states. Raise corporate taxes too high and jobs go with the companies. Raise property taxes too high and we have local chaos and disincentives to economic development.
Right now Connecticut’s balance in the tax portfolio still reflects founding father’s mentality. When land was king, taxes were based on property ownership because in the 1600’s - that’s where the money was. That changed in the last 4 centuries.
If we believe our taxes are investments, and we should, we want a high performing portfolio. To provide for a safe and secure future we want those taxes we put our stock in to be balanced enough to provide consistent revenue that compliments the economy, stable revenue that is not as affected by economic swings, and equitable so that the contribution level has a good relationship with the ability to pay.
Connecticut is quite disjointed when it comes to the combined tax effort of its “investors”. The ability to contribute needs to be separated from amount contributed which is often an argument for avoiding a more balanced system. Progressive tax structures take into account what one has left over after paying the survival bills - food, hosing, utilities, health care etc. If it costs $25,000 to survive how much is left to pay taxes if your wages are $26,000 - it’s a lot of effort to be an investor at that level. If your wages are $190,000 and your survival costs are $100,000 your effort is less and you can be a better investor.
To be fair, since we all reap the reward of good investing in our state and everyone needs to be helping out, it makes sense to make this work on the effort basis.
Enough of the background - cut to the chase.
Our state has not applied those rules well and it will not be easy to change because our steady habits prevail. We need to change if we want to bring our system up to speed with this millenium and the world we live in. We need to rebalance. Shift the over reliance from the big effort property tax to the less effort income and sales/use taxes and do what we can to mitigate the outliers - ie EITC for working poor. Just as any investor concerned with their future does- we need to look harder, longer and more often at the portfolio and rebalance as the economy shifts. For instance, our sales tax philosophy is more oriented to goods. That was fine when CT was a big time manufacturing dynamo. We have much more of a service economy now but the philosophy did not shift with the times.
To do that we need to change our culture and embrace needed looks and changes in more relevant time frames - There has been no real look or action since 1991 with the advent of the income tax.
Taxes do great things. We have help when we need it, schools for our children, infrastructure for commerce, courts and process for our conflicts, protection from harm and a lot more. If we believe investing in our cities, towns and ourselves is a good thing we become motivated to look at ways to make the portfolio work better. When we demonize taxes slashing, cutting and disinvestment is the outcome - and not the best approach for a better future. That’s also a culture shift.
Right now the legislature has a number of bills that start us on the path to become better investors. There are more positive investment strategies in the democrats version than any of the others but a longer view needs to be applied even to that one. The effort formula misses the mark. For instance - there is an increase in the property tax credit for state income taxes. If that money was redirected to towns for direct property tax reduction a lot of effort would be saved and the portfolio would be moving on a posuitive rebalance track. Reducing the income tax with credits at his time does not solve our problem in the long term.
Whatever comes out of the legislature will be driven by political logic and reason along with phone calls and letters. No one can understand or control the first two but surely voters can drive the latter option.
You have until June 6.
