🔒Time to address CT’s billionaire shortage

The economic distress facing Hartford (and the entire state) has been attracting national media attention and analysis. 

For example, the Aug. 15th regional edition of the New York Times featured a piece entitled “Hartford, with its Finances in Disarray, Veers Towards Bankruptcy.” Reuters picked up the same theme with an Aug. 23rd story entitled “Drowning in debt, Connecticut faces budget crunch.”

 As far as analysis is concerned, neither story had anything new to say about the facts on the ground (we are out of money), but both took time to repeat a meme that has reverberated around Connecticut for decades:  the Constitution State is a land of great wealth disparities. 

The Times story noted the “gulf between the affluent enclaves that drive Connecticut's wealth and its larger cities that have long grappled with high crime, underperforming schools and unsure financial footing.”  Reuters, in turn, noted that our state is “home to hedge fund billionaires alongside cities mired in poverty.”  

My question is what, if anything, does a discussion of the wealth disparities (which undeniably exist) add to the debate about our dire circumstances?   My answer is that the disparities, as such, have nothing to do with the state's insolvency (which is the result of inept governance), and are being raised only because they are a convenient smokescreen for the interests that caused the mess in the first place (while allowing them to advocate for higher tax rates).  

Finally, if we were serious about this issue we would recognize that as a matter of simple tax return arithmetic we would be far better off if there were more tax-paying billionaires living in those “affluent enclaves” than there are at present. 

My analysis is as follows.

First, the focus on disparities suggests falsely that we really don't have a fiscal problem because there is plenty of wealth in the state, and all we need to do is take more of it from the wealthy and give it to government officials to pay the bills. 

The idea that we can fix things simply by increasing taxes at the upper income level is misguided. It will not only enable the same bad spending behavior that caused the problem, but give billionaires more reason to leave (just like General Electric, Aetna and now Alexion).

Second, there is in the state a strain of radical thinkers who use the disparities argument to cast the problem as one of greed and injustice, as if wealth creation is a zero-sum game, that there is wealth in Greenwich only because there is poverty in Bridgeport. 

If we were living in 18th-century France I would be a militant too. Prior to the French Revolution (1789) the privileged classes (the monarchy, nobles and clergy) were exempt from taxation and were supported by taxes on the lower classes (peasants, artisans and merchants). 

But today, state and federal income tax rates are progressive — the rates go up with the amount of income earned. If people in the state are earning more, the amount paid to the state in absolute dollars increases even if the tax rate does not change.   

Third, there are myriad governmental, trade association and private analyses of the budget that are a click away on the internet; and, to be sure, people with an agenda will often try to spin the numbers to suit their needs.  But the base numbers from 1991 (the year the income tax was enacted) and those from the 2017 fiscal year (that ended June 30) say it all.

In 1991 the population was 3.3 million and the state's annual budget was approximately $7.5 billion; in 2017 the numbers are 3.6 million people with spending of approximately $20 billion.  What did we get for the money?   The plight of the “cities mired in poverty” (which should concern us all because they portend an economic dead end for people living there) has not improved; and the state-funded, community-based nonprofits (which maintain the safety net in those same cities and elsewhere) have been starved for well over a decade. 

As I see it, the wealth disparities are owned by the interests in the state that taxed and spent us into a corner over the last 30 years — the same interests that have vaporized the value of the Connecticut brand (as a place to do business and live) on both the international and national stage. 

Finally, I want to add a sincere comment about a somewhat relevant story in the August 25th Hartford Courant: “Group of Millionaires Pushes For Higher Taxes On The Wealthy.”

Members of the group apparently feel they “can afford to pay more and should.”  There is an easier way for them to help.  They can write tax deductible checks to the many state-funded, social-service agencies (many of which operate in the poor cities) that are starving because the state has cut them off.  

A direct contribution to these nonprofits cuts out the middleman (the state), ensuring that the money will be well spent assisting those most in need. 

John M. Horak is the director of TANGO Nonprofit Education and Consulting. The opinions expressed are his own.