GOP Budget Promises Tax Cuts, Smaller State Workforce
The Republicans today released their alternative budget proposal. It is, unsurprisingly, full of tax cuts. And why are they proposing it?
In light of alarming revenue numbers just released from OFA, legislative Democrats indicated that they might do nothing with the current year’s budget, making no changes to what was enacted last year. House and Senate Republicans believe now is not the time to do nothing. It’s time to do something.
Sound reasoning. There are several major pieces of this budget plan to discuss. First, the tax cuts:
Cut gas prices by 10 cents through a summer state tax moratorium and a roll back the scheduled gross receipts tax increase of .5 percent on July 1. Those roll backs will save consumers $50 million.Eliminate the $250 Business Entity Tax over two years that all businesses pay just for opening their doors. This will save $35 million ($17.5 million in the first year)
Phase out of the so-called Death Tax cliff that will save estates $24 million and help keep more people in Connecticut ($12 million in the first year).
Cutting the gas tax for the summer won’t have much of an impact–not with gas prices up around $4/gallon. Rolling back the gross receipts tax increase, however, is a better idea. It’s also sound policy to eliminate the business entity tax, which is a nuisance to small businesses.
Phasing out the “death tax cliff,” however, makes a lot less sense. There is no convincing reason to do it beyond the vague threat that old, rich people may decide to go to another state and have their estates taxed there instead. It frankly seems like pandering.
Then there’s the matter of how to pay for it–which involves cutting the state workforce by offering retirement incentives:
Offer up to 11,600 eligible state workers an early retirement incentive program, or ERIP, to save a projected $163 million in the next fiscal year.
The full document states that for every three persons who retire, only two would be re-hired. The exception would be “critical” areas like the state police.
The Office of Fiscal Analysis suggests that over 4,000 workers would take them up on the ERIP, which would allow $163 million to be saved and slash the state workforce. In 2009, Republicans want the workforce to stand at about 42,000 (down from the current 47,000 or so)–the lowest level since the 1990s.
Unfortunately, that’s a gamble. If not enough state workers actually take them up on it and retire, the Republicans could see those savings evaporate. They may also run into trouble should revenues continue to fall. The Republicans accuse Democrats of relying on “controversial savings,” including unallocated lapses and relying on savings from Medicaid/HUSKY, but frankly they are doing the same thing unless they’re willing to fire workers to make up for any shortfall.
The Republican “do something” budget has some very good points, like getting rid of the gasoline gross receipts tax increase and eliminating the business entity tax. Rolling back the estate tax and relying on state worker retirements are a lot riskier.
So what happens now? Well, a few of these ideas may trickle into the budget discussions, which are really between the governor and the Democrats. Gov. Rell may pick up on one or two of these tax ideas. Will any of them actually happen? …No, probably not. In fact, I’d be surprised if many changes to the existing budget were made at all–especially with all the talk about keeping the budget in place entirely unchanged. But expect the Republicans to strongly push these proposals over the session’s remaining days.