CHRIS POWELL: Governor needn't raise taxes since inflation did it for him

Published on Wednesday, 16 February 2022 20:55

Addressing the General Assembly last week, Governor Lamont touted state government's comfortable financial position, a reversal of the position he inherited when he took office three years ago. As this is an election year, he proposed to spend a lot more money without raising taxes.

Some of the extra spending may make a difference, as with medical care for the poor.

More of the spending will please various special interests, especially members of municipal teacher unions, though what the governor intends with another big special interest, members of the state employee unions, remains unclear, since their new contracts are still being negotiated.

But it may be hard to identify any state budget in the last 50 years that made much difference to life in Connecticut, except for one: the first budget of Gov. Lowell P. Weicker Jr.'s administration in 1991, which, incorporating a state income tax that vastly increased state government's revenue, secured the dominance of the government class and has prevented reconsideration of failing policies to this day.

So no matter how much more has been spent by state government since then, Connecticut has had the same old problems to a greater degree – urban poverty, inadequate education, neglected infrastructure, and an economy and a population declining relative to the rest of the country.

Standing out in Lamont's budget in this respect is the University of Connecticut Health Center in Farmington, which chronically runs big deficits, largely because of excessive personnel costs. Rather than address those costs the governor would appropriate another $50 million as deficit coverage. State government cannot economize in an election year – or any year, for that matter.

It is hard to see any policy rationale for the governor's proposal to waive state taxes on income paid from pension funds. Pension payments are income just as much as ordinary wages and are enjoyed more by the financially comfortable than by the poor. So this is a tax break for the rich. Only the election ahead can explain it.

The governor proposes spending tens of millions more for mental health treatment in response to the explosion of distress arising during the virus epidemic.

But government itself caused most of that distress with its mistaken closures of the economy and schools when policy should have been focused on protecting those most vulnerable to the virus – the elderly, chronically ill, and otherwise unhealthy. Restoring normal life for those who are at no special risk from the virus might be mental health care enough.

The governor's touting state government's seemingly ample cash position, several billion dollars, is misleading. For that cash position remains small compared to state government's grotesque unfunded pension obligations and long-term debt, estimated at as much as $100 billion.

But the worst misapprehension about the governor's budget is that it doesn't raise taxes.

This is because most of state government's cash surplus results from the billions received from the federal government in epidemic emergency aid, money the federal government essentially created from nothing while government both hobbled the economy and paid people not to work.

This policy has diminished production of goods and services while increasing demand, driving up prices. Now inflation is soaring, running at the highest level in 40 years, probably at an annualized rate of 15%, well above the heavily manipulated and deceitful official figures.

Inflation at 15% is effectively a 15% increase in income and sales taxes. So while the extra cash state government and municipal governments have gotten from the federal government looks like free money, in fact it already has been extracted from the people through currency devaluation – and most of all from the poorest, people who have only wage income and don't own much in real estate and stocks, which have risen sharply with inflation.

For the governor and state legislators, preparing to spend the extra money, and for the people they will spend it on, happy days are here again. For nearly everyone else, life has never been more expensive.

Will any candidates this year explain it to them?

Chris Powell is a columnist for the Journal Inquirer in Manchester.

Posted in The Bristol Press, Column on Wednesday, 16 February 2022 20:55. Updated: Wednesday, 16 February 2022 20:58.