The Blue-State Model Collapses in Connecticut

Republicans have a chance to advance a better fiscal model and take control of the legislature.

Government finance is now the greatest source of controversy in Connecticut, owing to billion-dollar deficits and an epic debt load that ensures high taxes for many years to come. In national politics, Connecticut is deep blue: Its entire congressional delegation is Democratic, and it hasn’t voted for a Republican presidential candidate in 28 years. But the GOP has recently notched strong gains in the state legislature. Though it’s far from clear which party will prevail, the fight for control of state government will depend on who can better respond to broad public recognition that Connecticut needs a new fiscal model.

Many Connecticut conservatives cite the adoption of an income tax in 1991 as the beginning of the state’s woes. Up to that point, the Land of Steady Habits had an inspired run, poaching businesses and residents from overtaxed New York. Connecticut governor Lowell Weicker, a former Republican who served as an independent, worked out a deal with lawmakers: Government would impose a spending cap in exchange for the tax hike. But the state never fully implemented the former.

After having been raised four times, the top marginal income-tax rate now stands at 6.99 percent, almost two points higher than the 5.1 percent in neighboring Massachusetts. The income tax has generated a flood of new revenues — $126 billion over 25 years, according to the Hartford-based Yankee Institute for Public Policy — but somehow state lawmakers neglected to direct adequate funds to the pension system. As a consequence, Connecticut’s state employees’ retirement system is funded at only 35.5 percent, one of lowest rates in the nation. Despite a slew of recent tax increases, state government now faces deficits of $1.5 and $1.6 billion in the next two fiscal years.

No one seriously believes that the state can grow its way out…. Read the entire piece here at National Review Online

This article is republished with permission from our friends at the Manhattan Institute for Policy Research.