🔒Tax hikes not a budget-balancing solution

The debate over raising taxes in Connecticut will likely heat up in the weeks ahead as lawmakers begin to tackle billion-dollar deficits projected for each of the next two fiscal years.

Although few, if any, policymakers are openly discussing a desire to raise taxes, pressure to do so — from state employee labor unions and others — is already mounting.

The progressive Connecticut Voices for Children advocacy group, for example, issued a report last week urging lawmakers to consider more than $3 billion in tax hikes, mainly targeted at wealthy individuals and businesses. Their “menu of revenue options” includes:

• Increasing the income tax's top marginal rate by one-half of 1 percentage point ($238 million);

• Boosting tax rates on capital gains and dividends-related earnings ($134.6 million);

• Applying the sales tax to services ($730 million to $1.5 billion);

• Enacting a sweetened beverage tax ($85 to $141 million);

• Instituting a low-wage employer fee ($305 million).

We can't blame Connecticut Voices, whose mission is to promote the “well-being” of children and families, for pushing for revenue it thinks will help its core constituency, but the policy ideas are misguided and will only worsen the state's fiscal crisis. While the tax hikes could raise extra revenues in the short term, they will dampen long-term business confidence and investment and encourage more taxpayers, including some of our highest earners, to flee the state.

To be clear, Connecticut's economy will be hurt by any path legislators choose. Significant budget cuts will impact nonprofits, school systems, state contractors and any other individuals who draw a paycheck (directly or indirectly) from the state of Connecticut. In the short term, austerity will result in job losses and funding reductions that curb economic activity in the state.

Likewise, tax increases will move money out of the private sector and further erode the public's confidence in government's ability to get its fiscal house in order without continually asking more from taxpayers. That, in turn, will make it harder long term to retain and attract skilled workers and employers, a trend already taking hold in recent years.

From July 2015 to July 2016, Connecticut experienced a net domestic out-migration of 29,880 people, leading to a third straight year of population declines, thereby shrinking our pool of taxpayers.

Of course many factors, including our aging population seeking warmer climates, contribute to the population shift, but people — especially younger workers — are attracted to dynamic cities and states that offer economic certainty and abundant job opportunities.

That's why in addition to making tough choices on budget cuts, lawmakers must also develop a more comprehensive economic development strategy that revamps our tax structure and better prioritizes investments in education, transportation, and economic development to ensure the state can compete for jobs with Boston and New York City, which are big draws for Nutmeggers even though they are higher-cost locations.

We also have a moral obligation to care for the most needy, without breeding a culture of lifelong government dependency.

There will be no easy choices in the weeks ahead and we understand many current policymakers aren't responsible for the fiscal mess we are in. Our budget problems are partly the result of prior administrations' and legislative leaders' poor fiscal management.

The key now will be avoiding the sins of our fathers and setting a more stable path forward.