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Group: Burden Not Extreme

By Mara Lee

January 13, 2012

A group that advocates for more services for the disadvantaged says the conventional wisdom about how the state responded to its fiscal crisis is wrong, and Connecticut raised revenues more in previous recessions than in this one to close deficits.

This deficit was larger, so the amount of taxes collected was larger, but as a proportion of the response, it was 37 percent, compared to 42 percent in 2002-2003 and 44 percent in 1989-1992, Connecticut Voices for Children's analysis found.

The analysis did not consider the federal tax money that flowed to Connecticut to help cover shortfalls in public education because of town's tax woes, or the federal dollars that helped cover the surge in demand for Medicaid.

Connecticut Voices for Children also noted that state expenditures have been constant as a proportion of state resident's incomes over the last 20 years. But income taxes have risen relative to incomes, as revenue from corporate business taxes has fallen.

Corporation business taxes fell 73 percent and sales taxes 44 percent as a proportion of personal income between 1990 and 2010. "This decline was brought about by corporate tax cuts, expanded loopholes, and tax avoidance by businesses," the group said.

Sales taxes are a smaller proportion of income now because people spend more money on manicures, house cleaning, investment planning and other services, which have not been subject to sales taxes, though the latest changes to the sales tax begins to change that.

For a family in the middle of the income distribution -- with average earnings of $96,000 -- state and local taxes take 9.9 percent annually, compared to 9.6 percent before the tax increase, the analysis said.