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Fiscal reform won’t be easy

January 29, 2019

Gov. Ned Lamont campaigned on an agenda of bringing structural change to how Connecticut raises revenues and spends what it brings in. The Democrat didn’t say much, however, about what it might look like.

Now the public is starting to find out.

Proposals that emerged this week — one from the governor’s office and others from the Senate leadership — suggest that structural change may indeed be on the menu. If any of these ideas were to win approval it would mark a stark departure of prior budgetary fixes. Those usually amounted to tweaks and adjustments, spending one-time revenue sources and increasing existing taxes to get through another budget cycle.

Invariably over the past decade the next legislative session would arrive with forecasts of projected deficits because — structurally speaking — not much had changed.

Proposals so far would expand what products are subject to the sales tax, force small school systems to merge into regional districts and amend the property tax system, also long targeted for reform that never arrives.

Absent, so far, are plans to cut state spending or address the grossly underfunded state pension plan for teachers. To be fair however, the public will not get a full picture of how the new administration wants to deal with revenue and spending until the governor submits his budget proposal a month from now.

A trial balloon floated by the Lamont administration Monday immediately encountered strong turbulence. A Connecticut Mirror story revealed the new governor is looking at ending the sales tax exemption on groceries, medications and other exempted goods.

The public’s initial reaction seemed to be, “No way!” based on comments left by online readers. And the state’s political class was not rushing to embrace the idea.

Taxing milk and bread and medicine is a troubling idea, though the Mirror noted that 14 states already tax groceries. It would contribute to the middle-class squeeze. The wealthy can handle it. The needy helped by the supplemental nutrition assistance program (food stamps) could not be taxed under federal guidelines when making SNAP purchases.

But those struggling just above the threshold for receiving such help would see a spike in grocery bills that could limit food on the table.

Lawmakers should not reject the idea out of hand, however. It is sound policy to review what goods are exempted from the sales tax and if the exemptions make sense. Connecticut might do what other states do and impose a lower rate on groceries and other goods. A broader sales tax foundation would better protect the state fiscally from big revenue drops during economic downturns.

Such a proposal, if it makes it into Lamont’s budget, can only be fairly analyzed in the context of the governor’s overall tax and spending plan.

Bombshells also emerged from the Senate. Senate President Pro Tempore Martin M. Looney introduced legislation to end local property taxation of motor vehicles and replace it with a uniform state assessment. That’s a discussion worth having. Currently, drivers in poor urban centers pay a much higher vehicle tax for a car with the same value than do car owners in affluent communities.

Looney would also impose a one-mill state real estate tax — 1,000 of assessed value. But he would provide property tax breaks for owner-occupied homes and higher reimbursements to cities with large tax-free institutions such as colleges and hospitals.

Generating plenty of heat was another Looney proposal, this one to require towns with fewer than 40,000 populations to consolidate with another school district, an effort to trim “backroom” costs such as administration, accounting and purchasing.

A similar proposal, this one co-sponsored by Sen. Cathy Osten, D-Sprague, would require districts with fewer than 2,000 students to form a new regional district or join an existing one.

There was immediate pushback on the idea of tampering with the state’s small, community educational systems, but we agreed with Looney when he said, “The time has come to undertake reform or at least get a lively and engaged conversation about promoting regionalization.”

The session has just begun, but it is encouraging to see big ideas, as controversial as they may be. Connecticut does indeed need structural change and that won’t come without shaking things up.

 

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