- - Sunday, May 21, 2017

ANALYSIS/OPINION:

Soaking the rich is fun, but the rich aren’t always as rich as the masses think they are. John D. Rockefeller might have used hundred-dollar bills to light his cigars, as in the popular imagination of his day, but Connecticut is learning that the supply of millionaires and hundred-dollar bills is finite.

Connecticut, our richest state, where mere millionaires have nothing much to brag about, is learning that hard truth. There’s just so much blood you can squeeze out of a turnip, no matter how big and fat the turnip might be. Even the Democratic governor, Dannel Malloy, says enough is enough.

Once intoxicated by the prospect of perpetual expansion of revenues from soaking the richest, Connecticut expects a $400 million shortfall from state income-tax collections this year, and that will worsen a budget crisis that has prompted the three major ratings company to slash the state’s credit rating.

The state budget office tells The Wall Street Journal that income tax collections will fall in this fiscal year for the first time since the end of the recession. The governor has twice raised taxes on the 11,223 Connecticut millionaires, but he thinks he can’t do it a third time.

“You can’t go back to that well again,” Kevin Sullivan, the commissioner of the state Department of Revenue Services, tells the Journal. “The idea that there is yet another significant amount, in terms of long-term stability, to get out of that portion of the population is just not true.”

Nobody — well, almost nobody — sheds tears over the plight and pain of a millionaire. The exceptions are the state’s budget economists who understand that the millionaires, who pay a third of the state’s tax revenue, deserve some consideration. Beating an exhausted horse yields nothing but a bloody horse corpse.

Connecticut is not alone among the states facing budget shortfalls this year, but it is unique for having so many millionaires, many of them refugees from the chatter and clatter of New York City, drawn to good public and private schools, idyllic small towns, and good jobs in hedge funds, large insurance and technology companies that gives the state the nation’s highest per capita income.

An analysis by Standard and Poor finds that nine states are considering tax increases this year, typically new taxes on corporations and raising sales taxes. Several states, including Connecticut, New Jersey, Illinois and Pennsylvania, are reckoned to be vulnerable to fiscal stress “even as the broader economy shows signs of gathering momentum.”

Some states that rely heavily on soaking the rich, such as New York, have the good fortune of a growing population. Everybody wants to live in New York City, or think they do, and this gives the state a constantly replenished source of tax revenues. “If you can count on a steady influx of new residents, you can count on some additional revenue from them,” Mark Robbins, professor public policy at the University of Connecticut,” tells the Journal. “But where the population is flat [as in Connecticut], that is one thing you don’t have to look to.”

Gov. Malloy has asked for $700 million in concessions from public-sector unions, but good luck with that. Leaders of those unions think more soaking is all that’s called for. A spokesman for Connecticut’s largest public-sector union says the state should ask wealthy taxpayers to make the sacrifices needed. It’s a familiar refrain.

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