On the Record; 603

So. I'm Bob Douglas and welcome to On The Record our guest for this week's program are State Representative Thomas Luby of Meriden. He's a Democrat serving in his third term in the general assembly. And we welcome back state representative Ronald smoko of Hamden. He too is a Democrat a veteran lawmaker now serving in his eighth term. And joining us is Bob King who covers the state legislature for the journal Inquirer in Manchester. To both of you welcome our program thank you very much for joining us tonight. You represent a little bit let's start with you first. You joined with about 20 others of your colleagues a couple weeks ago in a press conference at the state capitol urging repeal of the state income tax that passed earlier this year. What's the rationale from you and your Democratic colleagues for repeal of the state income tax at this time. Sure. I'll tell you about I think one of the key words is is that this time in our view this tax does too much takes too much

money from too many people. At a time when you can't afford to do so. It also takes money from people in a manner that we think is unfair to the middle class and to those people that are really pulling the wagon. It is what's called progressive. But in its calculation of progress if it does not for example take into consideration many of the benefits of programs that the state offers to lower income people. So in our view what happens is that the middle class guy the guy who's working the long week probably has two incomes and a house doesn't qualify for much financial assistance for the kids. Doesn't get the special programs a state offers. He ends up really pulling the load unfairly. Also given the very difficult state of the economy now and I have to tell you I think it's far more difficult. I think the economic problem is far larger than originally believed. Nine or six months ago.

That this is the wrong time to send the downward spiral into high speed. And that's what we think this will do. As a practical question and in terms of the numbers you think the repeal effort should go forward one if there is no alternative budget that has the votes. And two if those who are supporting repeal don't have the votes to override what is expected to be a gubernatorial veto. But I have to tell you that I think the only responsible position is one that is that when you repeal it you with the same time put something else in its place. The last thing I want to see and I can tell you the last thing my family wants to see is for us to repeal this income tax sometime in November and then spend three more months arguing about how to replace it. I think that if we're going to repeal we have to have an alternative and the alternative ought to be on the plate at that time.

Representative smoker you voted for the income tax that's on the books although this was not your income tax you have traditionally not any close to what you think it was better than was what my good friend you know others were espousing as far as the coalition patch for you. You have historically supported tax reform. I have some kind of a tax on an income. Why is repeal a bad idea and what your rationale rationale not to repeal it. Last time Tom and I are in agreement on one thing we're both trying to be as sensitive as we can to the middle class no matter what tax structure that we implement it is going to impact dramatically there because we are a middle class state. We've had the luxury in the past back in the 70s and 80s to be able to avoid an income tax and I mean that was a luxury. When you look at the ledger for business in the state we don't have a lot of pluses the ones we do have are very strong. You know we got a very strong manpower pool. We got excellent quality of life if you have money but then you get into the other factors of business and and you really find those historic advantages being outweighed by the the detrimental aspects of some of the other things we do at the highest energy cost in the country got the highest

property taxes we've got the highest corporation income tax we've got the highest sales tax in the country. Forty five percent of which approximately is paid for at least initially you know by the business community and the business community's been voting over the last year and a half and they're voting with their feet. They're walking out of this state. The opportunities for people in the state I think are deteriorating dramatically in my district. The problem is not with an income tax in my estimation. It's with people that are unemployed and a whole new group of people that are underemployed. Those people that were making 50 or $60000 a year two years ago. They have lost those jobs are back to work now but they're back to work at 20000 and $25000 year service jobs. They're losing their homes. They're having cars repossessed. They're trying to get their electricity turned back on. It's a whole new dynamic quite frankly what we have to do in the state. If we are going to perpetuate the strong historical middle class that we have is to make ourselves somewhat amenable to additional business activity it's been

sorely lacking. We can't compete with the thirteen point eight percent corporation income tax when our neighbors are charging eight or nine. We can't compete with an 8 percent sales tax when our neighbors are charging 5 percent. The idea is to have a lower level on those types of taxes as well as a very competitive state income tax at the margin. We're in New England. We have a difficult economic time it's going to continue. The banking industry is an absolute disarray to the financial marketplace is incapable in my estimation of funding the type of recovery that we all have to have. But we have to be able to attract. Quality business opportunity into the state and the way to do that is to eliminate part of the emphasis on the business community to make ourselves somewhat amenable to it. And on the other hand to have among the lowest if not the lowest income tax in the region. People are justifiably upset you know not only did we implement an income tax but we also reversed at the same time the historical regressive idea of our tax structure. The notion that people

making under $20000 could pay seven percent of their income in state taxes in those making over $200000 could pay three in three and a quarter percent. Now you have to read Money magazine Fortune magazine they've been saying for years that if if you have money if you make over $200000 a year no better place in the union to live than the state of Connecticut. And who was paying for that. Well I got a hot flash for you the middle class and the working poor and those of moderate income. What we've tried to do at the same time as not raise unnecessary revenues to support government is to switch around that historic taxing emphasis to make it at least nominally more fair. So at this point which you have out there is two types of people. By our statistical analysis you have about 700000 people who are genuinely paying substantially more taxes. Then you have 900000 people or taxpayers who think they are because this is a very visible tax. They actually know what the true cost of government is. I give you one quick you got ample of

this in the know. I'll let Tom have the floor again. The reality is this year's budget the one that was just implemented. Increase estate expenditures only about 1 percent more than last year we're only raising roughly the same amount of money. Last year was an absolute budget the buckle we knew we were doing. I didn't vote for the revenue estimates because I said they were grossly inadequate last year. We knew we were creating a gigantic deficit. But this is essentially the same budget as last year in its outlays. However this is the true cost of government. Last year people got a billion dollars in goods and services more than they were being asked to pay for. All I'm suggesting and I'll support additional cuts in this budget. But once we get to the bottom line there has to be adequacy. We can't do with the federal government's been doing since the 80s telling people they can have missiles and boats and programs you know by the way for this decade only you don't have to pay for it. We have to eliminate that and get back to a commonsense approach in government which will say to the people of the state here's the range of goods and

services that you're going to get. But on the other hand this is genuinely and honestly what they're going to cost no more this fiction no more billion dollar deficits No more half trillion dollar deficits. Let's get down to the bottom line in the government were the one percent of you folks in the moderate Democratic group have a difficult. Program in trying to write a new budget mustn't A couple things about that one mustn't any such budget include a lot of painful cuts including aid to towns. And secondly do you. Are you worried at all about becoming a little too close and too closely associated with the Republicans in this venture. Good question first I have to tell you that as a Democrat I don't define myself based on what the Republicans aren't. I don't look at Republicans and say well I want to be different. What I do is look at what I think are the critical problems now facing us and saying this is what I

think a solution is. This goes too far this doesn't go far enough so that I have to tell you that where the Republican stand has very little to do with what I think the solutions are or what the moderates do want. I think that the question of hard decisions is undeniable. But I have to tell you that when Connecticut was at its peak economically and that was in the 1988 1989 before we lost almost a hundred thousand jobs the budget was about 6.4 billion total expenditures. Now we're edging towards a billion and a half dollars more after we've lost 100000 jobs. And after people have a given givebacks at work in the private sector. And we're saying to ourselves. If we could live with that much of then then maybe we can get closer to that mark now because we have fewer people paying the bill. Fewer people working. And the costs of everything

are going up. One more point if I can and that is decisions are going to be made here. In my view with the income tax did was it decided that the legislature and the governor wasn't going to make the decision a cut is going to be made here. Billions of a billion dollars or more. And the question is does government play a major role in that process or do we say to the families of Connecticut you do. And right now it's not a question of whether cuts will be made. What we've done is we've asked the people of Connecticut Hey you cut rather than the government. We are spending more this year than before in a billion and a half dollars more than we did just a few years ago at the peak. So I don't think there's any question that we've got to dig deeper. They are hard decisions. And in contrast frankly to some of the rhetoric I have to tell you as a Democrat a lot of the programs that would be affected I don't view was fat.

A strong conscience and a strong economy would mandate that those programs be filled. The question is now can we afford it. Are we being immoral. Are we going to go back to the level of spending that was supported by basically the same group of people a few years ago. Or at least moving in that direction. No what we're doing is just being realistic in saying to people look at. We think that when there is cuts to be made it's not fair to tell you the families of Connecticut you make the cuts. You make the hard decisions because we're just going to go up. That's sort of the moderate point of view is that we think the government sometimes is the solution and sometimes it's a problem. Government can help but it can also hurt. And at this point we think the government service too much. Prison of smoke oh there's a movement afoot to repair the tax to make changes in the income tax that might reduce the burden on the middle class.

First of all do you support these and secondly from a tactical point of view do you feel that the repeal effort must fail first. Oh without question before there is a repair effort. No one at the Capitol or anywhere else in the state believes that you will get serious consideration for any type of revise or or or change in the existing structure until this entire repeal movement or unless this entire repeal movement runs its course. Once that's settled and it may succeed in all honesty but once it's settled if it doesn't then I think people start looking at a more constructive way to go about the implementation of a tax on income. I've been saying since last January that the only logical way to implement this would be through with a piggyback on your federal return. It addresses the real human concerns of people day care to the auctions mortgage interest deductions dependent deductions. The entire gamut of what people face on a day to day basis and the problems that they have to really address themselves to. It

was criticism of it that I tried to rebut and I think the rebuttal is is is reaching the point now where people understand was that the federal system is replete with inconsistent season tax shelters for the rich and all of that nothing could be farther from the truth now federal tax reform of 86 one of the real positive things to come out of the 80s straight now to the vast majority of that there's still a few things that we have to tinker on from that were grandfathered prior to 1986 but those can be adjusted with a few modifications. It would be fairer up and down the line it would take the the tax impetus even more than it does. It has been all those folks in the 50 $100000 bracket and frankly from my good friends outon Senator Nixon's district it rubs up the folks making over $200000 even more than they've already been roughed up. Entire income tax an area they're getting hit substantially more in that tax bracket. My guess is with the reduction in interest and dividends taxes passive income taxes that they can afford to pay even a little bit more than they are to the

positive impact of those folks in the in the real world the true middle class those making between 40 and 80 are the folks that are most genuinely impacted and those who are talking about cuts the Republicans at a news conference a couple days ago at the state capitol and talked about water coolers and a few other things but. You really have to talk about what cutting aid to local municipalities cuts in education cuts and Medicaid when you really want to talk about hundreds of millions of dollars of cuts that are theoretically possible. Yeah I mean you have to talk about those kinds of things like I don't know. There's no question Bob that what you're what you're talking about is the major changes in programs that many people would find a better day support. And are we going to see a budget being proposed that is going to include those kinds of cuts. Is that what you're saying in the next several weeks or next month or two. Yes some of those areas I think are undoubtedly among those areas that are

being considered. I just can't avoid it. I mean personnel in general. You know we have a government even though we've lost again 100000 jobs in the private sector at this point. State government if you add general fund positions and quasi governmental agencies were the same as we were at the peak. Exactly the same. But I think what we're talking about is adjustments all over but fundamentally I think we have to ask the question. Which programs truly work. Which programs really get us where we need to go and which programs serve the most needy and then make hard decisions on which ones we just can't afford today because there was a time when whatever program exists now didn't exist. And what we have to do is pick and choose. The problem politically and I'll tell you it's it's a problem that is that is aggravated by the splits and the groups and it's aggravated by the sort of normal politics is that most politicians do not want to say no. And most

politicians have a very high regard for the special interest groups to whom they will have to say no. And if it's universal it's a universal problem. In other words no political party and there's no faction that is immune from that kind of pressure. But fundamentally I think what we have to be is we have to streamline the government until people say please don't touch it anymore. Right now they're saying that you just can't hurt us any more than you're hurting us right now and it's our obligation instead of just putting the burden on them to cut back the family budget telling them Don't bother saving for retirement telling them Don't bother saving for your kid's education that maybe the government will make some tough decisions instead. Do you see those cuts being proposed and made. Well you know this isn't a discussion a subjective in. It's all sounds great in theory but the reality is since January we've looked over every line item in the budget and we've made incredible cuts. I know what Tom's district is like but the correspondence I get the mail I get from real people are

second only to the income taxes from the children of senior citizens in nursing homes that we're paying on average state. Investment of twenty five to thirty thousand dollars your person your citizen nursing I'll tell you the cut we made this year in that area we cut the personal allowance for people in nursing home seniors on Medicaid from forty two to thirty dollars. In other words we cut by one hundred forty four dollars a year. A benefit in a program of 25 to $30000 a year for skilled nursing home care for seniors. People are extraordinarily upset about that and I can't blame them. But that's just one very small area you look at respite care for the retired. We've eliminated that in its entirety. Tom talks about perhaps cutting municipal aid that sounds great in the subjective in my town that means a very large increase in local property taxes or some incredible reduced programs at the municipal level. You can't cut corrections we had a mandate from the 80s in 1980 our corrections budget was around 130 million dollars.

It's over half a billion now. Difference being in 1980 we had 4000 people in prison. Today we have fourteen thousand one to get tough on crime it was absolutely the proper thing to do. I wanted to stop the revolving door and wanted somebody who sells drugs to go to jail spend some time there. Extraordinarily expensive proposition to do the right thing to do societal lean governmentally but extraordinarily expensive and we could go down the entire litany item by item. But until somebody does that and looks at the ramification what we do the elderly the con pays program we increase the co-pay from $4 to $10 if you look at some of the mail we get they say cut off all new programs that were implemented in the last five years. There was no contest program five years ago. Do we really want to go to seniors and tell them we're not going to do that. The circuit breaker program for the elderly. We dramatically reduce the qualifying income levels. Tremendous amount of fallout at the local level. You know you have to take them one by one before you say

cut. Do you think it is because of the reaction to the income tax bills poll wise in the number of people who are at the rally a couple years ago and what you folks have been hearing from your own constituents. Do you think among voters out there that they are now willing to take some kinds of cuts in order to get rid of the income tax that they were not prepared to take before they had long if you don't you'll cut a program that is near and dear to their heart. Absolutely. I'll tell you I've gotten letters from from people criticizing the income tax saying oh by the way how about the Medicaid benefit for my mom and the those types of things. The rubber has to meet the road. They want the benefits. The 1980s were great like that. Give them everything they want but don't make them pay for it. Can't do that you're saying you know is the bottom line here so you don't think they're ready to give up those benefits yet. They will do it. Kicking and Screaming. I mean I have to tell you. I think they're ready. I think they're saying that there is a limit to what government can do. There's a real question whether the billions of dollars the government is

spending on some of those programs work when you triple the amount of money you spend on education when you double educator salaries including administrators and there's no change. You have to ask yourself in the government although you want to help teachers you believe they need a solid working wage you have to ask yourself Are we getting what we're paying for that's our job. And I think what they're saying is that look at we're not so sure it's worth the price anymore. We're paying a lot more in property taxes already and still what are we getting for it. And when when dozens of municipal officials meet and say look we're willing to take the risk of those hits. What they're saying is they're hearing from their people that look at there is a government cannot continue to take more whether it is property tax or it is sales tax or it is income tax. You can spend lifetimes going up up in some point. There is a there is a natural limit. But most of all with the natural and that is is that we have these profound consciences and we know that in the

perfect world we would like to help everyone. The problem is we just don't have the money to take it out by just just a second Tom pointed out the Classic inconsistency of that. I listened to that press conference with those municipal officials. They said we don't want an income tax and they also said in the next breath Oh by the way don't cut any to municipal way. We can't afford the cut we can't raise local property taxes. You leave the impression that these folks would accept cuts in useable services of municipal aid to their towns. They would accept an eight to 10 mill increase in local property taxes. That's not what they said Tom. They were like every other constituent group they said cut everybody but us. Well I have to tell you that no mayor is going to go out and say please reduce the aid to my town. But the mere fact that they're saying to government don't do this you're taking too much already. But I think in a representative or a state senator say if we do this if we are going to cut municipal a the local towns that means marriage in my hometown Hamdan you're going to get

less money maybe and it might force you to raise where the balancing act. There are winners and losers government and taxes. The problem is government has been providing a lot more necessarily and services but it's costing us more and more every year. There were more people working. They are getting higher salaries their benefits are better than everybody in the private sector and the average guy is saying look it you're asking me to make some very difficult decisions now at home. You are asking me not to do things for my children and I have to tell you don't. We have only four minutes left. I just like to know what each of you gentlemen thinks might be the ramifications of this whole income tax and repeal movement. And next fall 92 General Assembly elections. Well any time you make a major restructuring in government there is going to be incredible fallout. I don't know how much of the dust is going to settle between now and next November. As a Democrat from suburbia I have to do what I think is intellectually morally correct

for the people I represent. A lot of them are very upset with it. But I have an obligation after 15 years in the legislature having made state government budgetary process easy. A major undertaking of mine over those 15 years to use that experience. To their benefit I think I've made the right decision with with modification. I think it's in the long term benefit of the middle class that we try to make Connecticut a hospitable place so that middle class job opportunity can exist. I think if we continue to drop the bombs that we've been dropping in the business community we're just going to be a wasteland and we're going to have these jobs for the rich and then we're going to have a poor class that can't go anywhere and the middle class will be destroyed. We don't have the luxury anymore of saying to the business community you pay for it all. They again they're voting now they're leaving the state. They're not expanding here. They're laying off and they're just going someplace else that can't be king to allow to continue.

What about those ramifications next year. I can tell you that. Well for an economic side this tax at this time is exactly the wrong thing to do. It will create exactly the kind of problem that I think one is worried about an exodus of middle class skilled working people. We all talk to people and we all know that we've heard more than ever before. I'm thinking of leaving Connecticut. It's not just a guy who's has owns the equipment but it's the people that offer the skilled population that keeps that guy here that are thinking of leaving. I think it's a big issue. I don't think it's an issue though that will rise and fall and the debate will be over even in 92. How serious we have about two minutes left. How serious has this issue. Split the Democratic Party in the general assembly and we have. You have suggested others that you really become a minority party there. Now the state capitol. I think we are at the Democratic Party at this point is the de-facto minority party in the legislature. There is a coalition of Democrats with a unified Republican Party that can affect its will on the most critical documents

before the legislature and that is the budget. They have the capacity to put whatever they want on the governor's desk. Timonium my good friend used to say well we had Bill O'Neal playing goalie. Things that they didn't like. The only thing that the other Democratic party has the minority party has going for it now is a governor although we didn't support him and I didn't vote for him. He is playing goalie right now to make sure that we don't do anything that is too draconian from a bottom line standpoint. The effect on the party now. I think you can overstate it. The division both in the legislature and the state wide. In other words I don't think that there's always big debates. There's always big divisions amongst Democrats that's one of the things that makes us Democrats I think that we like to argue like the fighting of course everything we fight over we think is crucial. Then we got to have the other. That's your that's right. But I have to tell you I think that the divisions that might be within the legislature right now probably are not as obvious statewide amongst other officeholders and other raw voters.

Quickly we're going to repeal repeal were neither repeal or would be OK. I think time will tell. I don't time John thank you very much for being with us. Our guests have been State Representative Thomas Lee of Meriden and State Representative Randall smoke of Hamden. Our thanks again to Bob King of the journal Inquirer in Manchester and I'm Bob Douglas join us again next time for another interview on the record.