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State's Problem Is Revenue — Not Essential Services

By WADE GIBSON

May 04, 2012

The latest news from the state confirms what Connecticut families already know: the Great Recession is not really over. Thousands of us are still out of a home or a job, and many are still tallying losses from 2008 and 2009.

Personal incomes, business revenues, and as a result, Connecticut's tax receipts, still lag. Adjusted for inflation, state tax revenues are lower today than they were five years ago, although our needs have continued to grow.

In short, Connecticut has a revenue problem.

Before the recession, state taxes had held steady for almost two decades as a share of personal income, and spending had held steady as well. What changed in 2008 and 2009 were revenues: They fell through the floor, by billions of dollars per year. They are now recovering, but not as quickly as projected. Further deficits loom.

The temptation now for many policy-makers will be to cut education, transportation and other public services even further. But that would be the wrong choice, costing the state dearly in the long run. There's an old truth in farming that Connecticut's earliest settlers knew: Don't eat your seed corn. If you do, there will be nothing to plant next year.

Throughout the downturn, Connecticut policy-makers have pursued an unbalanced approach to closing the gap between citizens' needs and the state's resources. They have cut essential public services as deeply as any time in a generation, and have used new revenues less than in the last two recessions. In each of those downturns, revenue changes mopped up between 42 percent and 44 percent of the red ink; during the last recession, new revenue only covered 37 percent. Policy-makers have instead relied heavily on cuts.

But times like these are precisely when cutting public services hurts our families and our economic future most. More families need help putting food on the table, keeping a roof over their heads or paying their children's medical bills. Not only have policy-makers pulled back on these family supports, they have also cut back on direct investments in our future, such as funding for education and transportation.

The damage done by these cuts goes beyond the struggles of particular individuals and families. They cost our entire state missed opportunities. Children are far less likely to succeed if they grow up hungry, skip doctor visits and move every few months as their parents struggle to find work. Crowded schools and unaffordable colleges leave businesses without enough skilled workers. Crumbling bridges and gridlocked roads halt the flow of products, jobs and opportunity across Connecticut.

We must take a balanced approach that includes revenues to ensure our children, and our state, are equipped to succeed in the future. While continuing to seek cost savings across government, we must also consider ways to solve our revenue problem. We should close tax loopholes that big corporations routinely use to avoid millions in state taxes. They should pay their fair share, not some fraction of what small businesses pay. We should also examine the personal income tax on millionaires and billionaires — our top rate is significantly lower than in New York and New Jersey, as are our property and sales taxes.

Just as our parents made public investments that created the opportunities we had as kids, we must step up if our kids are to have the same chances. Restoring Connecticut's promise of opportunity for all our children, in the midst of recession and debt, is indeed a great challenge. We must face it together.

Wade Gibson is a Senior Policy Fellow at Connecticut Voices for Children (www.ctvoices.org).