Monday, February 27, 2006

Tax (Repeal) Season

The General Assembly has three taxes on its plate this session, and the question with each one is the same: keep eating or throw it away?

The Car Tax

Gov. Rell wants to get rid of it, while a chorus of municipal leaders and Democrats says that towns will actually lose money. Rell's tax cut proposal will get its first public hearing today.

Polls show public support for the idea, which includes using money from the state's two casinos to reimburse municipalities for the amount they would otherwise collect from the car taxes.
...
Several Democratic leaders, including House Speaker James A. Amann, D-Milford, have come out against the proposal as being unfair to certain taxpayers. At the same time, however, they have backed away from outright pledges to block the plan. (AP "Panel")

My guess is that the Democrats are waiting to see if public support for the tax cut remains high before moving one way or the other. We'll probably see some modified form of the car tax cut which keeps the $350 homeowners' credit, and finds some other source of revenue for towns.

The Estate Tax

If you have an estate worth $2 million or more, and death is raising the jewel-encrusted knocker on your front door, you're for the repeal of the estate tax. The idea here is to keep rich people in Connecticut, so they can spend money here.

Rell and others who support her plan say the state loses untold numbers of dollars in income taxes, spending and other money from wealthy residents who move elsewhere to avoid Connecticut's estate tax.
...
State Rep. Cameron Staples, D-New Haven, co-chairman of the General Assembly committee on state finances, revenue and bonding, says it would be "foolish to dig a trench for ourselves by cutting taxes dramatically when we're projecting deficits."

The legislature's nonpartisan fiscal analysis office is forecasting deficits of hundreds of millions of dollars in the 2008, 2009, and 2010 budget years. (AP "Plan")

I agree with Staples: we should try to plan for those deficit years as best we can. This is the price of the huge transportation plans both sides want. Republicans like this tax cut a great deal, comparing us wistfully to Florida and Arizona, but it's very unlikely that our tax rates will ever be competitive with theirs. We simply have too many services, and too much aging infrastructure in need of repair.

Besides, the Democrats will never let it out of committee anyway.

Manufactring Equipment

This is the easy one.

Paying local taxes on manufacturing equipment increases the burden on Connecticut's businesses as they struggle to stay competitive, John A. Salce says.

Salce, the owner of a local precision machining job shop in Plainville, said his industry is struggling with an unfair disadvantage because competitors in many other states pay no such tax.
...
But many municipalities worry that eliminating the tax would increase the financial strain on them. A promise of state reimbursement is suspect, they said, because the state typically reduces its payments to towns whenever its own budget runs into red ink. (Stacom)

It's very difficult to legislate economic growth. However, this seems like one of those barriers to business that just about everyone can agree on (except towns). I have a feeling it will pass quickly.

Passing the Burden On

One of the problems with all of these tax repeal proposals is that each has the potential to hurt municipalities. The solution in at least two of the cases seems to be some sort of increase in state aid: in the case of the governor's car tax plan the state will reimburse towns out of casino money, while one of the proposals for the elimination of the manufacturing equipment tax involves the state reimbursing towns out of the surplus.

In both cases, one more power of taxation has been taken from the towns and put into the hands of the state. There may come a time when the towns don't have the power to tax at all: they just decide how to divide up the money given to them by the state.

Will that be such a bad thing, in the end? I wonder.

Sources

"Panel To Hold Hearing On Rell's Car-Tax Plan." Associated Press 27 February, 2006.

"Plan to end estate tax raising class warfare concerns." Associated Press 26 February, 2006.

Stacom, Don. "Local Tax Called Unfair." Hartford Courant 27 February, 2006.

20 comments:

Anonymous said...

What is the Dems plan for property tax reform? All this talk no subsatnce. You want real property tax reform get rid of binding arbitration!!! That's not going to happen because when you have unions paying off Dems in the legislature (in the form of campaign donations) it will never happen!!!

Binding arb, prevailing wage, project labor agrements...you name it, municipalities pay for it. Get rid of those outdated programs and you'll see real property tax reform.

bluecoat said...

The tax on equipment actually discourages reinvestment and more hiring by existing businesses. The manufacturer must include the annual tax as an operating expense when it does an analysis of whether to buy or subcontract out to another state. Do I think Ammann the simpleton will understand how businesses other than a mall store work? Nope. Ammann doesn't understand anything other than tax breaks and grants that have never worked. Bye Bye Milford Bick!

DeanFan84 said...

If anyone out there still doesn't understand that the Lamont/Lieberman primary is about more than just the war, I would recommend reading this very thoughtful piece by Yale junior Benjamin Simon.

Here is an excerpt:
"But this race is about much more than Iraq. Just this past year, Lieberman voted to confirm John Roberts, and he voted against the filibuster of Samuel Alito LAW '75. He also voted for Attorney General Alberto Gonzales, who, as White House Counsel, called the Geneva Conventions "quaint" and was responsible for the legal justifications for torture at the Abu Ghraib and Guantanamo Bay prisons. Lieberman's strong ties to industry left him standing alone as a Democrat willing to work on Bush's ultimately failed privatization of Social Security. And just this week, he refused to join an overwhelming majority of lawmakers from both parties in opposing the Bush administration's sale of administrative contracts for 21 ports to a company owned by the United Arab Emirates. Lieberman supported federal intervention in the Terry Schiavo case, voted to stop federal aid to public schools that used materials "supportive of homosexuality" and, in 2002, he presided over the confirmation hearings for Michael Brown, the supremely unqualified nominee for FEMA chief whom Lieberman wholeheartedly supported.

It can't get much worse than that, can it? Oh, it can. Perhaps Lieberman's most galling characteristic is his willingness to appear in conservative media and to publicly and unreservedly bash Democratic policies and other Democrats..."

MysticD said...

It's one thing for a Yale student to opine that the Lamont primary is about more than Iraq. It is another for Lamont to actually make it about more than Iraq. From everything I have heard, he is a one track minded guy so far.

bluecoat said...

Chris Dodd, who was the brains behind saving the subbase and the smartest Democrat in CT politics, is backing Joe all the way if you saw the interview on FOX 61 and the Courant this weekend. There was supposed to be a link but I can't find it. And anti-war Diane Farrel who's mentored by Dodd all along and going after Shays like a is backing Joe, too. Dodd wants that seat to be a Democrat and he knows if the party left gave it to Lamont in the primary a relatively sure thing could slip away. It will take a Republican that's been critical of Bush's handling of the war to go up against Joe like a Richard Lugar or a Chuck Hagel but the Republicans will probably be too stubborn to go for it.

But hey, I thought this was about tax reform.

Franks said...

Having now pulled nearly one billion dollars out of state taxpayers to fund a rainy day account, tax relief in the hundreds of millions dollars is clearly in order.

Forecasted deficits are about as accurate as fortunetelling, with surplus predictions when needed, so their use for revenue projections has limited value.

Anon (11:50) raised what should be the issue, government costs. Changing the revenue sources, car taxs vs. property tax credits, does not lessen expenses.

Democrats should call Rells plan, with a larger tax revenue reform package, but aiming at expenses to achieve some lasting benefit.

Gabe said...

When did Chuck Hagel move to CT?

DeanFan84 said...

Bluecoat--

Here is the link to Fox61's Sunday forum, Beyond the Headlines, with Shelly Sindland.

Dodd cares about a lowly House seat? Since when? In 2004 Dodd just made the obligatory appearance or two. That's all.

Anyway, check out the clip. It reminded of the time when John McCain lamely hugged George Bush during his 2004 campaign.

Dodd's came off as just plain pathetic. I really felt bad for him. (and he's finally starting to show some age.) When the Courant's David Lightman asked a tough questions, Chris basically says, "I'm not here to discuss anything of substance, I'm just here to support my old buddy, Joe..."

Anonymous said...

From everything I've heard, MysticD isn't paying attention and is simply repeating the Lieberman talking points.

Go to LamontBlog and watch his interviews where he talks about the culture of corruption in Washington, about health care, about providing proper checks and balances on executive power, and so on.

Check the Ned Lamont Resources and read reports from other events where Ned has spoken.

sanity said...

I still can't buy into this auto tax repeal.

Where was the Casino money that they plan to use to help fund this repeal going before the proposed repeal? Where is that money going right now? If it is money that can be "diverted" then use it to fund an increase in the tax credit.

And I think it was Pat Scully who pointed out that what the state will give to the towns is a fixed sum for the next three years or so. No factoring in population growth or decline within a municipality or movement between municipalities or even new car purchases. And at the end of the three years, what's to stop the state from cutting the amount given to towns when faced with a budget deficit? I don't like the state taking this source of revenue away from the control of municipalities.

And although I am not a big fan of penalizing success, I am also not a big fan of giving tax breaks on excess. What I mean is that I don't believe in tax relief on something like another car or two more than you need because you want to have that convertible Porsche to drive in the summer or like to collect cars. I prefer tax cuts or credits that can be tied to job and economic growth or new efficiencies in government spending.

The state should raise the property tax credit, not repeal tax on automobiles.

Anonymous said...

I love the attitude of the far left.

"Gouge the rich. They'll never move"

Methinks the CT General Assembly are all descendants of the politicians in Brooklyn circa 1956 who said that about the Dodgers.

We've lost good chunks of the insurance and defense industries (and they too "couldn't or wouldn;t move") already. So why wouldn't good chunks of the "jewel encrusted" move?

Is Greenwich all that much nicer than Charlottesville?...or is Democrat VA Governor Tim Kaine a stooge to repeal his state's death tax so as to lure the aged and wealthy to the Commonwealth?

Anonymous said...

Dems don't want to get rid of car tax since it represents "only 8%" of property taxes. Oh, so that isn't much $$?

They are being so damn transparent. Since it wasn't their idea, and they got snookered, it isn't a good one. Give me a break.

As an aside, Amann looks like a puppet - his press conference today was a good example. "I don't want my kids going to school in China or India." Oh. First, I didn't know he had children. He gets a question (the first one) about where the money is going to come from for his new proposal, and he turns to the ED of the Commission on Children and says "Elaine, you have an answers on that?" Who is in charge here????


As an aside, he is getting more bumps on his face... maybe the results of being caught in the headlights....

Chris MC said...

DeStefano came up huge on this heating oil thing. Just huge.

That's a helluva tax break. Reducing costs on essential goods and services and passing them along to consumers, by cutting corporate fat and eliminating high-priced overheads.

We never talk about those taxes. What taxes? Why, the ones we pay to large oil corporations for the commodities they provide. What was it, $25 to $30 billion of profits in a single quarter for a single behemoth (Exxon/Mobil) last year?

The Republicans have that one right: people like to keep more of their own hard-earned money.

Way to seize the opportunity Mayor.

Anonymous said...

BTW, who's Justice Department waived antitrust concerns to permit Exxon & Mobil to merge?

"ahh, did not have business relations with that oil company"

Anonymous said...

Jodi giving credit to the New Haven Mayor for his efforts in locating some Chavez oil shows class on her part. I say she jumps two more points in the polls as a result of it.

Anonymous said...

BTW, see how Diane Farrell is trying out for the 2008 gymnastics team.

She's adamant against politicians who support the Iraq War when she is in her 4th District campaign mode.

Then in her Democrat hack persona she stands foresquare for Joe Lieberman, who's Iraq position is identical to Shays'

Just what Congress needs, more hypocrisy

http://cayankee.blogs.com/cayankee/2006/02/farrells_action.html

Anonymous said...

Anonymous--

You are shocked by hypocricy in politics? You must be new to following the game, it is all about getting elected not about principles. Didn't you see that with Joe's birthday rally?

Dodd, Larson, Courtney, Murphy-- supporting a pro-war Senate candidate publically--- but when Joe is out of earshot-- talking about what they will do in Washington.....

Anonymous said...

What do you expect the other Democrats on the ticket to do? Their nuanced (not hypocritical) position is that they support Joe, but they disagree with his position on the war. What's wrong with that?

These criticisms just point out what the Lamont candidacy has really done to Conn. Democrats -- put them in an impossible position, and weaken their chances of winning in November.

Lieberman still has overwhelming support in most of this state. Forcing the other democrats to come out against him just to please a small but fervent group of liberal activists won't help the cause in the long run.

bluecoat said...

I saw the FOX interview but just couldn't find the link on line so thanks. You may think Dood is old but he is as smart as a fox and he cares very deeply not about a lowly House seat but about a Senate seat - Joe's. Sindland did a lousy job with the interview as I don't think she knows much about national or international affairs or at least she has yet to learn how to interview national figures. The lead in piece was great whoever did it. And Lightman rarely was able to take control.

Hagel, nor Lugar, live in CT but I know Gabe knows that. My point is that not all GOPers have been up Bush's hind end on how he's handled Iraq.

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