Death by a Thousand Hikes
Even the most passive observers of the 2008 Presidential campaign will remember one of Republican nominee John McCain’s favorite jokes, “Remember the words of Chairman Mao: It’s always darkest before it’s totally black.”
That’s how many residents are feeling one day after Governor Dannel P. Malloy announced a $1.5 billion tax increase that would raise rates on pretty much everything that moves in the Connecticut economy from income to gasoline and cigarettes.
Looking at the plan, though, it seems clear that its authors want to raise as much revenue as humanly possible but without giving any one rate the ignominious honor of being the highest in the nation. Call it Death by a Thousand Hikes.
Take the cigarette tax for example. With a tax hike of 40 cents per pack, the cigarette tax will be $3.40/pack compared to Rhode Island’s $3.46 per pack rate (based on data from the Tax Foundation). We should be pleased that they left six cents per pack on the table. The real winner could be the state formerly known as Taxachusetts, where the rate of $2.51 per pack will seem like a bargain by comparison.
Liberals who have spent years pining for greater progressivity in the income tax system must want their money back today (there’s a first time for everything). Instead of proposing Rhode Island-style rates on wealthy households, Mr. Malloy opted for five new brackets on the middle class and hikes for everyone. You aren’t allowed to complain about it though because compared to the income tax rates of other states in the region,it isn’t higher than anyone else.
Connecticut’s gas prices already among the highest in the nation and so is the gas tax. Given this reality, it would seem foolish to raise this tax but the Governor was undeterred. Again, it won’t make the tax rate the highest in the nation but it will keep it close.
The “Almost the Worst But Not Quite” strategy is a curious way of communicating that Connecticut is, in the words of the Governor, “open for business”. Being competitive isn’t just being better than the worst – you have to excel at something.
Perhaps the Governor learned the wrong lesson by being Mayor of Stamford. Wooing the big companies from Wall Street meant that he just had to make Stamford marginally better than New York, not actually making it competitive with the rest of the world. In the current economy, growing jobs isn’t going to be about poaching from Rhode Island or New York. It has to be about actually being competitive so that companies and families want to locate here.
Until we learn that lesson as a state, though, we’ll continue to get what we pay for.
