POWELL: Wealthy should pay more, but in federal taxes, not state

Published on Friday, 19 February 2021 21:11
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Having just gotten big raises amid an economic depression with horrible unemployment in Connecticut, the state employee unions have proclaimed that they won’t consent to Governor Lamont’s budget proposal to freeze state employee salaries for a while. The unions insist that state government should raise taxes on the wealthy so they pay their “fair share.”

What is the “fair share” the wealthy should pay? “Fair share” advocates never provide any fixed calculation for it. That’s because it is only whatever best facilitates raises for state and municipal government employees. For when raises for government employees are drawn from taxes on people who aren’t so wealthy, there is always a political problem, as the non-wealthy seldom find it compelling to pay more to people who are already well paid.

But despite their comic self-interest, the state employee unions have a point about taxing the wealthy. For the emphasis of the federal government’s economic policy during the virus epidemic has not been on sustaining the income of people who have lost jobs and business, though of course some federal aid has been sent their way. No, the federal government’s emphasis has been on supporting financial asset prices, as with the purchase of government and corporate debt and by intervening, often surreptitiously, in markets.

Since most financial assets are owned by the well-to-do and they are the ones with most of the capital gains accrued in the past year, their share of the nation’s wealth has exploded while the share owned by ordinary working people has fallen. Federal government policy has been worsening income inequality and increasing the political influence of the wealthy.

It’s not that the federal government needs tax revenue. It can create money for itself with abandon. Since they cannot create money, states and municipalities need it. But trillions of federal dollars seem to be on the way to states and municipalities, so their need is not really so great right now - unless raises for state and municipal government employees are to take priority.

What’s urgent is reducing income inequality and equalizing political influence. So since the federal government did the wealthy an expensive and unnecessary favor, there would be justice in raising their capital gains taxes.

But the federal government is the place to do that, not state government in Connecticut, where taxes are already so high as to have been encouraging prosperous people to leave for many years, with the state steadily losing population relative to the rest of the country. Connecticut needs to be more competitive with taxes and the cost of living. Besides, any tax increase in Connecticut now will only diminish the incentive for Governor Lamont and the General Assembly to examine the expensive state policies that fail to achieve their nominal objectives.

For example, once again there is much clamor in the legislature to increase state grants to municipal schools. But 40 years of increasing those grants have failed to improve school performance. The grants have resulted only in higher pay for school employees. Legislators never ask what Connecticut gets for spending more in the name of education, presumably because they know that there is no relation between spending and school performance and that the only objective is to please the teacher unions.

Any inquiry into this might be revealing but also most impolitic so it will never happen.

Has raising state employee compensation improved services to the public? Of course nobody pretends that, but no legislators ever ask the question. Omitting state employee raises from his budget proposal, the governor shows he thinks state government can operate acceptably without another round of raises. His position is remarkable for a Democrat, since the state employee unions are his party’s army. But then a salary freeze is only his opening position in a negotiation.

Legislators will be part of that negotiation and most legislators are tools of the unions, so odds are that once again state employees will get raises before more money is appropriated for the nonprofit social-service organizations whose employees do government work at half the cost of state employees and are almost dirt-poor.

But that’s their own fault. They simply aren’t as politically organized as the state employees are.

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

Posted in The Bristol Press, Column, Editorials on Friday, 19 February 2021 21:11. Updated: Friday, 19 February 2021 21:14.