STUMP » Articles » Setting the Stage 2018: Connecticut Says Bye Bye Billionaires » 10 January 2018, 04:51

Where Stu & MP spout off about everything.

Setting the Stage 2018: Connecticut Says Bye Bye Billionaires  

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10 January 2018, 04:51

Connecticut has a gubernatorial race this year, one of the top political battlegrounds according to Politco.

A Tremont Public Advisors LLC poll conducted in mid-December found a generic Republican candidate beating a generic Democratic candidate — 35 percent to 23 percent, with 42 percent undecided — despite the fact that Connecticut has not voted Republican at the presidential level since 1988.

Not sure that a Republican would really want to win, though.

THE PRIOR GOVERNOR: LEAVING AFTER HIS ONE IDEA KEEPS FAILING

The idea?

Tax more, spend more:

Raising taxes and increasing state spending didn’t work the first time Daniel Malloy was confronted with a budget crisis. So naturally, he tried the same thing twice more. If insanity can be defined as doing the same thing over and over while expecting a different result, the governor of my home state of Connecticut, Daniel Malloy, should get his head checked. Within a month of taking office in 2011, Malloy called for the largest tax increase in state history to close a multi-billion-dollar state deficit. His Democratic legislative allies delivered the hike, along with the spending increase he also requested.

Four years later, faced with a comparable deficit, Malloy offered the same prescription: a multi-billion dollar tax increase and more state spending. Democratic legislators once again obliged. Two years after that, when 2017 brought yet another deficit, the General Assembly delivered a tax increase and a spending boost without any prompting from Malloy. Republican cooperation meant the tax hike was smaller (hundreds of millions instead of billions), but state spending levels remained liberal (up nearly 9 percent from 2015), and the governor signed the General Assembly’s bill into law.

That was eight weeks ago. Now the current year’s budget is over $200 million in the red, and the shortfall in the next biennial budget promises to be the largest yet: over $4 billion. Our state’s economy is collapsing before our eyes — and what does Malloy propose? More hikes, this time to the sales tax, the cigarette tax, and the real-estate-conveyance tax, as well as entirely new taxes on hotel rooms and e-cigarettes.

Do you get an idea why Mallor decided not to run again? He could have. But all the answers are ugly, especially with federal tax bill knocking down the deductibility of Connecticut property taxes and state income taxes.

(Whee says the person taxed in CT and NY)

But hey, CT has loads of super-rich hedge fund managers, right?

BYE BYE BILLIONAIRES

Connecticut lost $2.6 billion in 2015 as high-wealth residents moved out:

Newly released data from the Internal Revenue Service shows a record loss of high-income tax filers and their families in 2015 following the state’s second largest tax increase.

A total of $2.6 billion in adjusted gross income was lost to other states as Connecticut experienced a net loss of roughly 20,179 residents.

The largest group of tax filers leaving the state were those earning over $200,000 per year. Between 2015 and 2016, Connecticut saw a net loss of 2,050 tax filers who earn more than $200,000 per year, the most since the IRS began tracking that income bracket.

….
According to the data, 64,381 people moved into Connecticut between 2015 and 2016, bringing an AGI of $3.3 billion.

But during that same period, 84,560 moved out, taking with them an AGI of a little more than $6 billion.

Those in the highest measured income bracket accounted for $2.5 billion in lost AGI, an average of $1.2 million per household.

Now, that’s adjusted gross income, not state taxes, but they’re missing out on income taxes & property taxes from these people.

Bates cautioned that there are limitations to the IRS data, particularly that people leave, but their job stays and is taken by someone else who then begins earning the same amount of income.

However, jobs in the high-paying financial industry are becoming more and more portable and Connecticut has already lost some wealthy investors and hedge fund managers to states like Florida.

The loss of residents and income have come on the heels of two of Connecticut’s largest tax increases in 2011 and 2015 and a very sluggish state economy.

Lots of people like living in Florida. I don’t like the gators, skeeters, and those hideously large bugs they get, I don’t like breathing in the mush they call air there. But that’s me. I understand some people like sun and warmth.

And Florida has no state income tax.

As the Yankee Institute notes, Connecticut is particularly sensitive to the moves of a few extremely high income people. In a prior post, I wrote about the special state office that keeps very close tabs on the state’s billionaires. And they’ve bribed them to stay.

But it’s hard to bribe billionaires for too long.

MONEY MOVING OUT

Editorial: Connecticut’s Money Is Moving Out

Connecticut’s money is moving out — and a lot of it is moving to Florida.

It’s common knowledge now that Connecticut is seeing an exodus of residents. But are the rich leaving? According to the latest IRS data, they are.

Legislators who hope to solve the state’s budget crisis with ever-higher taxes should pay attention. The data are clear:

Those who moved out of Connecticut from 2015 to 2016 took with them more than $6 billion in adjusted gross income, or AGI. People who moved to Connecticut brought with them only about $3.36 billion in AGI. The total net loss to Connecticut: $2.7 billion. In one year. That was in the top five of all states, regardless of population.

Connecticut realized $6.85 billion in income tax from the 2015 tax year, or 4.3 percent of the $161 billion in AGI reported from all filers. If that same ratio held true in 2016, then the loss of $2.7 billion in AGI would have meant an actual loss of more than $100 million in income tax revenue.

In one year. That doesn’t account for all of the problems in a $20 billion budget, but it’s a serious dent, and it’s indicative of a deep problem: Many of Connecticut’s wealthy residents are moving out, and they’re taking their money with them.

…..
The overall trend of richer people leaving Connecticut has been increasing over the last five years, according to the IRS data. The total number of tax filers and their average AGI for people who moved out of Connecticut was higher last year than at any time since before 2011-12. For example: From 2012 to 2013, more than 48,000 tax filers had moved out of Connecticut, nearly as many as moved out from 2015 to 2016, but the average return was about $112,000 in AGI, compared to over $123,000 last year.

Goodbye, rich people.

It’s not that Florida doesn’t have its problems — it does. But it has a unique situation: It can prop up most of its state government on sales tax revenues and attract residents by avoiding an income tax.

Connecticut’s financial problems are serious. We have crushing pension obligations, too long ignored. The state must find a way to deal with them without taxing the stuffing out of the rich. That is not a guaranteed way to increase income, as the IRS data show.

Thing is, the pensions really are extremely underfunded. If they’re not going to tax the stuffing out of everybody to fill that hole, that hole has to be made smaller.

By whacking benefits.

You ready to try that?

OH LOOK, MEDICARE COSTS MORE

Medicare program fix adds red ink to CT’s finances

To find some of the money to reverse cuts to a popular social services program, the legislature is expected Monday to raid $17.8 million owed to next fiscal year’s state budget — which already is at risk of a significant deficit.

According to the bill lawmakers are scheduled to vote on in special session, the General Assembly also would make changes to the state’s contribution to the teachers’ pension — changes that could worsen this fiscal year’s budget deficit and spark a legal debate as well.

…..
To reverse new eligibility restrictions for the Medicare Savings Program, which uses Medicaid funds to pay medical expenses that Medicare doesn’t cover for poor seniors and the disabled, legislators needed to find about $54 million this fiscal year. Estimates are those restrictions, if not reversed, could eliminate or reduce benefits for as many as 113,000 residents.

$54 million.

More than that was lost from the high income people moving away.

Creating a deficit next year to fund services now
One place they looked: next fiscal year’s finances.

When the General Assembly adopted the new, biennial budget in late October, it relied on a commonly used technique to achieve balance in both years.

As the plan was being designed, there were extra funds in the first year and too few in the second. To resolve this problem, the budget stipulates that $17.8 million in funds from the current fiscal year be carried forward into 2018-19.

But now, to find about $54 million for the Medicare Savings Program, lawmakers would cancel that transfer, leaving 2018-19 finances $17.8 million shy.

Further complicating matters, the legislature’s nonpartisan Office of Fiscal Analysis and the Malloy administration warned in November that tax receipts and other state revenues in the 2018-19 fiscal year already are projected to fall $150 million short of the level anticipated in the budget.

$150 million short. Heck, keeping those high income people would not have helped enough.

Double-counting the teachers’ pension savings?
The plan to restore funds for the social services program also could exacerbate a $224 million deficit projected for the current fiscal year, by again altering how the state budgets for teachers’ pensions.

Connecticut has been restricted somewhat in this area since 2008, when it borrowed $2 billion by issuing bonds with a 25-year life, to bolster the cash-starved pension program.

Oh yay, pension obligation bonds. That helped so much.

In other words, the budget technically appropriates a $1.29 billion state contribution for teachers’ pensions, but actually delivers that amount minus the $19.4 million extra teachers must kick in.

State Treasurer Denise L. Nappier decried this accounting maneuver, saying what legislators believe to be a loophole may or may not violate the letter of the bond covenant, but clearly violates the spirit.

But to find more resources for the Medicare Savings Program, the legislature is expected to vote Friday to officially reduce the teacher pension contribution line item by $19.4 million — even though it already assumed that savings elsewhere in the budget.

Oh, that sounds helpful.

So 2018 should be fun in Connecticut.