🔒Lawmakers agree (for now) tax hikes won’t solve budget crisis

If your head is spinning trying to grasp the myriad budget-deficit plans pitched by Republicans and Democrats over the last month, you're not alone.

Whether it's suspension of the state's public-finance system for elections, early-retirement incentives, or cuts to social services, education and municipal aid, it's been difficult to track the numerous proposals aimed at trimming nearly $350 million from this fiscal year's budget deficit. Regardless of the nuances in each proposal, there is a common theme that ties them all together: A realization by most policymakers that Connecticut can no longer tax its way out of fiscal crisis.

As a budget deal nears, Democrats and Republicans have largely avoided deficit-reduction remedies that sack taxpayers with additional burdens. It's a smart policy strategy and a clear signal the business communities' negative public reaction to the legislature's June tax hikes reverberated throughout the State Capitol's golden dome.

Will this sentiment last? We aren't so sure of that. Future tax hikes will most certainly be on the table soon, with the Office of Fiscal Analysis projecting a $2.3 billion deficit over the next two fiscal years. In fact, Senate President Martin Looney recently suggested the state look into a mansion tax, according to published reports.

Indeed, the current deficit-mitigation negotiations are simply a minor battle to a looming budget war. For now, however, it appears the business community will be spared from having to contribute more to the state's costly spending habits. If certain proposals gain support, like capping the new unitary reporting system for corporation taxes, some businesses may actually experience some small tax relief.

That's a gift many businesses will appreciate this holiday season.

While lawmakers seem to be closing in on a path forward, it's a good time to reflect on some of the good and bad policies that have been floated in recent weeks. Proposals that aren't incorporated into the final deficit-mitigation plan are likely to be retread in the months and years ahead.

One that is most troubling is early-retirement incentives, which have been pitched by Senate Democrats and Republicans. It's a bad idea and counterintuitive to the efforts Gov. Dannel P. Malloy and others are making to shore up the state's troubled pension system, which currently has $25.7 billion in unfunded liabilities. While early-retirement offerings save money in the short term (possibly as much as $80 million over the next two fiscal years, according to Senate Democrats) they simply add additional pension liabilities that prove more costly in the future.

Legislators must stop short-term fixes that serve as a Band-Aid to our state's problems rather than a cure. That's what got us into this mess to begin with.

Malloy pitched some reasonable cost-savings ideas early on, including closing a prison and courthouse, the type of restructuring that should be considered and implemented across all state agencies. Ironically, he's also pitched eliminating certain commissions that promote women and minority groups, ideas Republicans have pitched for years only to be condemned by Democratic demagoguery.

Negotiations are currently ongoing with many state-employee unions whose contracts are nearing expiration; they must yield givebacks, or at least wage freezes. This isn't an attack on organized labor, but simply a nod to the current-day economic realities, in which state employees account for about a quarter of the state budget.

In another strange twist, Democrats have even urged suspending the public campaign-finance system, which was aimed at weeding out political corruption following former Gov. John Rowland's bribery conviction. The program, however, hasn't stopped moneyed-interests from influencing political races, and we don't think taxpayers should have to pay for political campaigns. Connecticut residents and businesses already shoulder enough of a tax burden.

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