June 23, 2024

Keeping Media and Government Accountable.

Taxing Rich Doesn’t Work, Connecticut Learns

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Connecticut Gov. Dannel Malloy is learning about the Laffer curve the hard way. Despite huge tax hikes during Malloy’s term, the state faces a $5.2 billion deficit over the next two years.

Kansas legislators may want to heed Connecticut’s warning.

Lawmakers in the Nutmeg State face a $2.2 billion deficit next year, and Gov. Dannel Malloy warned the shortfalls are because state government depends too much on its wealthiest residents.

Somewhere economist Art Laffer is, well, laughing. Laffer advised Kansas Gov. Brownback on Kansas’ 2012 tax reform.

In the 1970s, Laffer, the story goes, drew on the back of a dinner napkin the Laffer curve, which theorizes tax collections decrease at some point despite increasing tax rates because people stop reporting or earning income. Or, as Connecticut is learning, flee the state like rats from a sinking ship.

Connecticut instituted an income tax for the first time in 1991. The rate was 4.5 percent. By 2015, the rate was 6.99 percent. Malloy himself has signed more than two dozen tax increases into law since he took office in 2011.

“It’s happening because the state of Connecticut depends too much on its wealthy residents, and wealthy residents are leaving,” WTNH 8 News reported April 28.

Between 2000 and 2010, the state lost 88,000 people who took more than $4.5 billion in income with them. In 2015, Connecticut earned the top spot in an annual United Van Lines’ outmigration survey. In 2016, Connecticut was fourth.

“The reality is that in Connecticut we get most of our money from very few people, and that can produce some very wild swings,” Malloy told the television station.

Connecticut lawmakers are still debating how to best fill the projected $5.2 billion shortfall over the next two years, but the Governor appears to be sobering to the idea of cutting government spending. He called for an immediate hiring freeze and a review of all spending at the end of April.

 

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