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Republicans: Wealthy Already Paying Their Fair Share On Income Taxes

CHRISTOPHER KEATING

July 27, 2009

Frustrated Democrats have been asking the same question for months: When are the rich going to pay their fair share?

State employee unions are also asking — broadcasting television commercials depicting wealthy fat-cats smoking cigars and brandishing brandy snifters as Republican Gov. M. Jodi Rell has avoided tax increases on the rich and corporations. The unions have spent about $400,000 since February on radio, television and cable advertisements in their campaign for tax fairness.

But Sen. L. Scott Frantz, R-Greenwich, says the rich are already paying their fair share.

In fact, Greenwich paid more than 14 percent of the state's entire income tax bill in 2007, or nearly $759 million, according to state records. When Greenwich is added to three other lower Fairfield County communities — New Canaan, Westport and Stamford — the total jumps to more than 25 percent of all income taxes collected.

Having only four of the 169 towns pay for more than 25 percent of the income tax bill certainly constitutes a fair share, Republicans say. In addition, those communities receive only a tiny fraction from the state in educational cost-sharing funds to operate their local public schools.

"We get back less than 1 percent of the money we send to Hartford," said Frantz, a business executive who is in his first year as a state senator.

The question of raising the state income tax lies at the heart of the five-month struggle over the state's projected $8.55 billion deficit for the next two fiscal years. Rell and the legislature have been battling at polar opposites on the tax question. Although Rell says the budget can be balanced without any tax increases, Democrats responded with a plan that hiked taxes by $2.5 billion over two years. Rell immediately vetoed the Democratic plan, and the state began the new fiscal year on July 1 without a budget. Connecticut is one of only three states still operating without a budget and is, instead, running on month-to-month executive orders signed by Rell.

With the income tax and tax fairness at center stage, the two sides have been negotiating at the governor's mansion, but they have still not reached a deal.

"We're making progress, but the progress is glacial," said Senate Majority Leader Martin Looney, D-New Haven. "We don't like the idea of governing by executive order."

Senate Republican leader John McKinney of Fairfield agreed that progress has been slow.

"There's still a lot of tough work to do," McKinney said. "It's not going to be easy."

McKinney and his fellow Republicans have voted against raising the income tax, and only 19 of the 24 Senate Democrats voted last month in favor of the increase. As such, the Senate was far short of the 24 votes — or two-thirds of the chamber — needed to override Rell's veto.

Like many Democrats, Shelley Geballe, the co-founder of the liberal-leaning Connecticut Voices for Children, says the rich should pay more than they do. Geballe has written extensively about the issue, saying that politicians and the general public need to look at the entire picture of taxation — meaning the income, sales and property taxes that residents pay. By that measure, the middle class pays a higher percentage of its income in overall taxes than the wealthy.

"The people in the top 1 percent — both before and after the federal tax deductions — are paying a far smaller share than the bottom 80 percent," Geballe said.

Without tax increases, Geballe is concerned that if Rell and the legislature cut too many vital social services, then "you've eroded the quality of life in the state of Connecticut." Those highly important budget decisions will be made behind closed doors in the weeks and months ahead.

"I see it as a pivotal moment in the state's history," she said.

At the opposite end of the philosophical spectrum is the Yankee Institute for Public Policy, a conservative counterpoint to Voices for Children that analyzes much of the same data.

The Yankee Institute studied the tax filings at the state Department of Revenue Services that outline the number of income tax filers in various income categories. The institute's report showed that 46.8 percent of all state income taxes in 2007 were paid by residents living in Fairfield County. That is more money than those living in six of the state's other eight counties — Litchfield, New Haven, Middlesex, Tolland, Windham and New London — combined.

The report noted that the top 6 percent of Connecticut taxpayers — earning more than $250,000 annually — pay more than the bottom 94 percent combined. It also showed that those earning more than $1 million annually in 2007 paid 35 percent of the income tax bill.

"It's easy to bash the rich and say they aren't pulling their weight, but we did the math," said Fergus Cullen, the Yankee Institute's executive director. "The idea that you can use the successful as a mule to carry the load for everyone else is wrong. ... There's no one else out there arguing the other side. "

The institute, Cullen said, published its report because "we wanted to make sure that the demagogues on the left who blamed the rich and were using them as the whipping boys" had a counter-argument.

The amount of income-tax money coming out of lower Fairfield County is even higher than many Hartford-area residents realize. In the Hartford area, the suburbs of Farmington, Glastonbury, Simsbury and Avon are generally considered upscale areas with wealthy residents.

In Greenwich, though, the residents paid an average of nearly $29,000 in state income tax per return — more than five times higher than Farmington's average of $5,410 per return. Greenwich residents also paid more than three times those in Avon paid per return and almost five times higher than Simsbury residents.

But Matt O'Connor, a spokesman for the state employee unions, said the tax issue is actually quite simple.

"We just need to raise rates on the wealthiest in Connecticut," O'Connor said. "Despite what the Yankee Institute claims in its most recent study, the wealthy in Connecticut are doing pretty good. The Greenwich hedge fund manager is certainly seeing lower numbers on his balance sheet, but he still has the second home on Long Island and the vacation home in the south of France and the fleet of cars. He's still living large."