The wealthiest state in the U.S. is having trouble collecting enough money to pay its bills, and the Democratic governor doesn’t think taxing the rich is the answer anymore.
After two decades of robust growth, Connecticut forecasts it will come in $400 million short in income-tax collections this fiscal year, worsening a budget crisis that has prompted all three major ratings firms recently to downgrade the state’s credit rating. Connecticut’s budget office estimates that income-tax collections will fall in fiscal 2017 for the first time since the recession.
Gov. Dannel Malloy has twice before bet that taxing the wealthy would help solve the state’s fiscal problems. But neither increase resulted in sustained revenue growth, according to his administration, which says it would be a mistake to do it a third time.
Gee, that’s too damn bad. The Nutmeg State has turned into a mini-me version of California, a one-party political basket case that has taken a place of great natural beauty and economic dynamism and turned it into a welfare state devoted to maintaining the Democrats in power via its (in Connecticut’s case) sinkhole cities.
Connecticut is one of seven states, including Pennsylvania, New Jersey and Illinois, that is vulnerable to fiscal stress “even as the broader economy shows signs of gathering momentum,” the report concluded.
It’s a strange turn for Connecticut, which has the highest per capita income in the country, according to the Bureau of Economic Analysis, and is home to hundreds of hedge funds, Yale University, and businesses like insurer Aetna Inc. and industrial giant United Technologies Inc.
The state projects a $5.1 billion budget deficit over the next two fiscal years, fueled by increases in fixed costs over that period including pension obligations, health-care expenses and debt servicing.
In its recent downgrade, which landed Connecticut with the third-lowest rating for a state, Moody’s Investors Service flagged the state’s shrinking population since 2013—the current population is 3.58 million—as contributing to an underperforming housing market and weak labor-force growth.
How can a state of three and a half million people project a $5 billion deficit over the next two years alone? You shouldn’t have to think very hard or very long.