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Connecticut has real income tax, fake spending cap

This summer, Connecticut will celebrate — or maybe “observe” is the better verb — the 25th anniversary of the state income tax.

And in November, we’ll be marking the 24th anniversary of the amendment to the state Constitution that was designed to make everyone feel better about the income tax — the state spending cap.

The income tax was real, but the spending cap turned out to be a fake.

But first, a little history. If Lowell Weicker is the father of the state income tax, Chester Bowles was its grandfather. Bowles, elected governor in 1948, was the first to propose replacing the state’s high sales tax with a more equitable income tax. He got nowhere, but along the way he did discover bonding as a way to pay for expensive projects that would otherwise bust the budget. 

Bowles didn’t get past what was then a two-year term, and for the next 20 years, governors of every persuasion were elected with the solemn pledge there would be no income tax on their watch. 

Most of them, however, were not reluctant to tax and spend, and the bonding introduced by Bowles was an extra gift to governors who were able to please the voters with feel-good projects to be paid for by the great-grandkids.

Taxing and spending took their toll, and in 1971, when Tom Meskill became the first Republican governor in 20 years, he was greeted on inauguration day with a $250 million deficit. 

The governor and the Democratic Legislature had to raise taxes, but how? Nobody wanted an income tax, but the alternative was an increase in the state’s already high sales tax. 

Meskill proposed upping the sales tax from 5 percent to 7 percent and removing nearly all exemptions, giving Connecticut the highest sales tax in the nation. The Democrats thought this was awful but couldn’t bring themselves to support the dreaded income tax.

Then, in the session’s final hours, at 12:35 a.m., “in the dead of night,” as income tax opponents would derisively recall, the Senate passed an income tax, and the House followed three hours later.

The governor condemned the legislators but didn’t veto the bill, and Connecticut had its first income tax — for all of 42 days. 

By August, an angry public had sent the Legislature back for a special session, and the income tax was repealed and replaced with a 6.5 percent sales tax instead of the 7.5 percent the governor wanted. 

Meskill raised more revenue by establishing a state lottery, making tough, unpopular spending cuts and left the state with a $65 million surplus when he left office after a single term.

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It would take another 20 years and another deficit crisis for Connecticut to pass a permanent income tax. This is the one pushed through by one-term Gov. Lowell Weicker, a former Republican who vetoed three budgets without an income tax before Lt. Gov. Eunice Groark broke an 18-18 tie in the Senate and the House passed an income tax by a 75-73 vote.

But the voters were memorably unhappy. Tens of thousands of them demonstrated against the new tax on the Capitol lawn, and the anger lasted long enough to inspire the next General Assembly to make amends by passing an amendment to the state Constitution. 

The amendment, which went to a referendum for ratification, required that budgets be balanced and that expenditures for any fiscal year “shall not exceed revenues.” Only they didn’t. It was a fake amendment.

The amendment was ratified by a resounding 80 percent of the voters in November of 1992 and is yet to be implemented by the Legislature. 

This giant loophole made to look like a constitutional amendment has allowed the cap to be repeatedly violated by making various spending items exempt from the cap during “emergencies” declared by the governor and confirmed by 60 percent of the legislators. 

In 2015, Attorney General Jepsen removed any doubt that the amendment was an elaborate con job when he declared it has no legal authority because of the General Assembly’s failure to implement it over nearly a quarter of a century.

But old habits are hard to break, and just the other day, Governor Malloy continued the con by asking the Appropriations Committee to exclude $153 million in pension liabilities from that imaginary spending cap. 

Coincidentally, as the Yankee Institute’s Zach Janowski has noted, the governor’s budget is just $153 million over the spending cap.

Maybe it’s true that you can’t fool all the people all the time, but the people who have run the state, Democrats and Republicans alike, have been trying hard for quite a while. 

 

Simsbury resident Dick Ahles is a retired journalist. Email him at dahles@hotmail.com.