The richest state in the nation is having trouble paying its bills and its 1 percenters may be tapped out.
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.
About $200 million of the drop in receipts came from the state’s closely watched top 100 earners, who are the source of an outsize proportion of the state’s revenue. Many of the state’s richest residents work for hedge funds, which have been hurt by a downturn in the industry.
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.
The governor is trying to get the public sector unions to agree to concessions that would save the state $700 million. You can imagine how that went over.
A union spokesman said the state should consider “asking Connecticut’s wealthiest taxpayers and largest corporations to sacrifice and pay a little more to protect the services that people rely on."
One reason not to "ask" the already highly-taxed rich to pay even more might be that the number of taxpayers who have left the state has exceeded the number moving in every year since 2010.
A thriving economy is a better way to raise tax revenue than penalizing people who already pay high taxes.
The progressive panacea is always taxing the rich. But it may have its limits.
Hat tip: Market Watch