Politics & Government
Connecticut’s wealthy can afford to pay more taxes
State Rep. Josh Elliott says it won't force them to leave the Nutmeg State
By Scott Benjamin
NEW HAVEN – If Connecticut is the Land of Steady Habits then one habit worth keeping is the wealthy Zip Codes in Fairfield County’s Gold Coast where there are streets of 12-bedroom mansions with a guest house, a Ferrari and a Lamborghini in the garage and enough capital gains tax receipts to keep the state budget in surplus.
Sources say if you take away a couple of those hedge fund kings living in Greenwich residences that look like castles, Connecticut would become the equivalent of the Yankees without Aaron Judge and Juan Soto, which, of course, would send Aaron Boone to the unemployment line and force him to sell his home in Greenwich.
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Would the upper-crust of Connecticut leave if their taxes were increased?
“It is not dependent on a state’s tax laws,” state Rep. Josh Elliott (D-88) of Hamden remarked in an interview with Patch.com. “We should feel comfortable about asking the wealthy to pay more. Any conversation we can have to have the wealthy pay more is a step forward.”
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However, Carol Platt Liebau and Frank Ricci of the Yankee Institute wrote recently in The Wall Street Journal that, “The top two percent of all filers paid 40 percent of state income tax in 2020,” according to the most recent Connecticut tax incidence report. A mere 478 taxpayers paying the top 6.99 percent rate accounted for 13.2 percent of the state’s income tax revenue in 2020.”
A sub-headline to their column read, “Hartford won’t be satisfied until every last millionaire in the state moves to New Hampshire or Florida.”
Elliott, a deputy speaker, said he wants to add a one percent capital gains charge to that 6.99 percent, and insists it won’t cause the wealthy to move to Concord or West Palm Beach.
Sociology Professor Cristobal Young – formerly of Stanford University and now teaching at Cornell University – wrote in his 2017 book, “The Myth Of Millionaire Tax Flight” – that Connecticut has the largest concentration of millionaires in the United States – 4.4 people for every 1,000 residents.
Young, who did extensive research on income data, wrote that usually marriage, children and jobs anchor millionaires to their locations, and it is, instead, the highly-educated, low-income people who are most mobile.
Young wrote that a 2011 survey of millionaires by the investment group Spectrem reported that 67 percent of them support higher taxes on millionaires.
State Rep. Bob Godfrey (D-110) of Danbury, the deputy speaker pro tempore, said, “I’ve actually gotten a couple of letters from millionaires saying that we love living in Connecticut and we’re willing to pay more in taxes so that other people can pay less.”
He added that there are more billionaires and more millionaires in Connecticut now than a decade ago.
Elliott said, “There is a point of diminishing returns But what we’re talking about doesn’t even come close to that.”
He exclaimed, “One percent, two percent [in capital gains surcharge tax rates], would do a lot for the budget. The state is not giving enough back to municipalities to help them with their schools, their police and their infrastructure.”
Young wrote than much of the discussion on millionaires’ tax flight comes from “instinct” and “anecdotes” and not statistical data.
Justin Potter of Kent, the Democratic candidate in the 30th state Senate District, said, “I think we have to be sensitive about increasing taxes on the wealthy because they might go elsewhere. That could lead to less tax revenue for the state if they went to Florida or another state and used it as their primary residence.”
State Senate Republican Leader Stephen Harding (R-30) of Brookfield: wrote that, “Connecticut is already one of the highest taxed states to begin with. It is a significant driver as to why so many hard-working men and women, as well as many businesses have left in recent years. We as legislators should be focusing our efforts on reducing that tax burden across the board for our constituents.”
Elliott commented, “We need more fairness in our tax code. The more money you make in the state the less percentage you pay in income on taxes.”
“The property tax and the sales tax are the most regressive taxes in the state,” he said “They hit the middle class significantly harder than the higher income.”
However, Bill Curry was carrying a banner calling for property tax reform 30 years ago when he first won the Democratic gubernatorial nomination. It hasn’t happened.
Elliott remarked, “It is a continuing education program.”
“It would take a lot of people to be on board,” Elliott said regarding a major property tax reform. “I don’t see it as impossible. But we’re not there right now.”
He said there a large disparity with a tax mill rate around 11 in Greenwich and about 57 in New Haven.
Ruy Teixeira, the co-author of “Where Have All The Democrats Gone?” recently said on a Wall Street Journal podcast that there is “a sense Democrats are no longer the party of the working class, but rather more the party of educated elites who are perhaps less interested in the fate of working-class voters than they should be”
Elliott acknowledged that the Republicans are increasing their share of the working class.
“I think they [the Republicans] are speaking to frustration,” Elliott explained. “But I don’t think that they are giving legitimate answers. I think they are doing a better job [at speaking to the frustration] than the Democrats. I don’t think the Democrats are speaking to frustration or coming up with answers.”
He added, “That is why I’m a little bit lonely up in the Legislature, because a number of folks do agree with me, but not nearly enough to pass the policies we need.”
Godfrey said he puts Elliott, 39, “on the short list of people who have the brains and mindset to run for higher office.”
He was unsuccessful in 2022 in his bid for the Democratic nomination for Secretary of the State in a five-way race.
“When Josh speaks people listen,” Godfrey said. “He’s an idea guy and he tries things and suggests things and he does his research. And he is especially interested in the economic side of government: How money is raised and spent.”
He added, “Josh is a deep thinker. I can’t say that of a lot of people in general.”
In a 2017 profile, Mark Pazniokas of CT Mirror wrote that Elliott was viewed at the State Capitol “as a disrupter, the young liberal with short, spiky hair who had the temerity to challenge House Speaker J. Brendan Sharkey for the Democratic nomination in the 88th District in Hamden.“ Sharkey retired and Eliott defeated the party-endorsed candidate in the 2016 primary.
However, Godfrey praised Elliott’s people skills.
“Josh is very affable,” he remarked. “He has a great sense of humor. He can approach you and talk about your family and friends. He can talk to you about ideas to move the state of Connecticut forward.”
Elliott commented, “The 08-09 recession forged my political identity in that it turned me into an economic populist. There are significantly more protections and regulations that we can provide to help members of the middle class.”
He said the two elected officials that he most admires are former presidents Franklin Delano Roosevelt and Theodore Roosevelt.
“I take a lot of my cues from those two presidents. I align myself with labor almost more than I align myself with Democrats, because it is that cross-consciousness that grew our middle class and provided opportunities for people,” Elliott commented.
On another topic: What about phasing out or eliminating the car tax?
Harding told Patch.com recently that “I think we can lower [the car tax.]”
Harding said that the state currently has $4 billion in budget reserves, which represents “over-taxation of the residents of Connecticut. [We should] help invest in our municipalities so that we could eventually phase out the car tax.”
Elliot exclaimed, “Municipalities would lose an incredible amount of revenue. The money would have to come from somewhere.”
“The political will does not yet exist to plug that hole,” Elliott said. “It [using budget reserves] is not really a long-term structural fix. There is not the political strength” to phase out the car tax.
State Sen. Eric Berthel (R-32) of Watertown has called for lowering the sales tax from 6.35 percent to 5.99 percent.
Elliott said, “It is either a loss of services or you have to find money somewhere else. I would support it if we are going to tax the wealthy more to fill in the hole.”
The state established the fiscal guardrails with the spending cap and the volatility cap in 2017 and extended them in 2023 for another five years. State Comptroller Sean Scanlon told Patch.com last year that they have helped increase the funding of the state employee pensions and ensured more fiscal stability.
Elliott complained that the guardrails “always have been too constrictive.”
He said that the additional capital gains revenue that has been directed toward paying down the pension debt and contributing to the rainy-day fund “ is not volatile. “It is consistent revenue. Any consistent revenue you have we should be using” for operating expenses and capital projects.
”Any consistent revenue you have we should be using,” Elliott declared. “We’re not funding our non-profits nearly enough, we’re not funding our public universities nearly enough, we’re not funding our transportation network nearly enough.”
He acknowledged that Connecticut is “still near the bottom of the pack” in paying down its pension obligations.
“But we’re going so much better than we were before,” he added.
CT Mirror budget reporter Keith Phaneuf said during a 2019 talk in Wilton that the state employee pensions were structurally underfunded each year from 1939 through 2010.
Said Elliott, “It took decades to put the weight on and it will take decades to take the weight off.”
What about that transportation network, which has been clogged with traffic for decades? The bipartisan federal infrastructure plan helps. But in 2015 under Democratic former Gov. Dannel Malloy (D-Essex) an ad-hoc committee recommended $100 billion in spending over the next 30 years. The federal money will only pay for a portion of that.
Gov. Ned Lamont’s (D-Greenwich) tolls plan in 2019 didn’t even qualify for the wild-card playoff round.
Elliott remarked, “I still think that at some point, tolls are a necessity. It is not a matter of ‘if,” it is a matter of ‘when.’ “
Elliott said he supports Lamont’s efforts to address climate change by removing the gas-powered vehicles from Connecticut’s highways by 2035 in response to global warming.
“It is the future of transportation,” he commented. “Not being ready for it is sticking our head in the sand.”
However, Teixeira has said that for some working-class voters climate change is 17th on their list priorities.
Explained Elliott, “We as elected officials need to take the concerns that the science community has and put that into reality.”
He also supports ranked choice voting in which voters rank the candidates in order of preference. Lamont has appointed a Working Group to offer recommendations.
Elliott said he has “carried the torch” on establishing universal voting.
Democratic former President Barack Obama endorsed the concept nine years ago and Miles Rappaport, the former Connecticut Secretary of the State, co-authored a book on the topic.
Elliott said he has had, “Problems from the left and the right. The right thinks that it is government overreach. The left thinks it would punish voters through fees.”
However, his plan would be similar to the system in Australia, one of the roughly 30 countries that has mandatory voting. A voter who did not participate could avoid paying the fine a number of ways.
Elliott said universal voting would boost turnout considerably by making it almost the equivalent of reporting for jury duty. USA Today has reported that Australia has a 90 percent turnout rate in its national elections. About 30 countries use the system.
However it appears that the capital gains surcharge is a higher priority.
“Universal voting is not number one for me,” Elliott explained. “It is probably not in the top 10.”
Resources:
Interview with Josh Elliott, Patch.com, on Monday, July 15, 2024.
Phone interview with Josh Elliott, Patch.com, on Wednesday, July 17, 2024.
E-mail statement from Stephen Harding. Patch.com, on Monday, July 22, 2024.
Phone interview with Justin Potter, Patch.com, on Monday, July 22, 2024.
Phone interview with Bob Godfrey, Patch.com, on Wednesday, July 24, 2024.
Cristobal Young, “The Myth Of Millionaire Tax Flight,” Stanford University Press, 2017.
E.J. Dionne and Miles Rappaport, “100 Percent Democracy,” The New Press, 2022.
https://patch.com/connecticut/brookfield/scanlon-optimistic-connecticuts-economy
https://www.ctpublic.org/news/2024-06-07/ranked-choice-voting-connecticut-lamont
https://ctmirror.org/2017/12/29/a-liberal-grades-his-colleagues-im-not-here-to-make-friends/
https://patch.com/connecticut/brookfield/connecticut-s-conservative-slice
https://www.wsj.com/articles/connecticut-democrats-try-to-tax-the-wealthy-away-luxury-ea5e2e51
