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32 Hartford Business Journal • September 11, 2017 • www.HartfordBusiness.com Opinion & Commentary EDITOR'S TAKE When will tax-hike threat end? No time soon I t appears some in Connecticut's legislature have few intentions to curb their appetite for impos- ing new and higher taxes on state residents. The most talked about tax increase this summer was House Democrats' plan to raise the sales tax from its current 6.35 percent rate to 6.85 percent, which would bring in additional revenue to help close a $3.5 billion deficit. Now there are murmurs that at least one moderate House Democrat is warming to the idea of increasing the income tax on the state's wealthiest residents, rather than cutting aid to cities and towns, nonprofits or other organizations that depend on the state apparatus. Tax increases on luxury goods, hotels and smokeless tobacco are also on the table, as are higher taxes on online transactions, according to published reports. Regardless of what type of budget is eventually passed, Connecti- cut's lower and middle classes will feel some pain, either through reduced services or, at the very least, higher property taxes. It's understandable some Democrats want the state's wealthi- est residents to shoulder more of the state's fiscal burden, but that strategy has proven ineffective in the past and will only contribute further to the state's long-term fiscal crisis. Democrat-controlled legislatures have raised the top marginal income tax rates three times in the last decade and our budget situ- ation has only deteriorated since then, an indication that Connecti- cut's tax policy has reached a point of diminishing returns. We've even begun to lose tax revenues from our wealthiest residents, who the state depends on to fund a significant chunk of its budget. For example, earlier this year it was revealed that tax revenue from the state's top 100 high- est-paying taxpayers declined 45 percent from 2015 to 2016, which cost the state $200 million. Various factors played into that decline, including lower investment returns from hedge funds, but state officials acknowledged some uber rich residents fled the state. Connecticut is already too dependent on its income tax (it contributes around 50 percent of state funds), which has proven to be an unpredictable revenue stream. Its per- formance is tied closely to the performances of the stock market and state and national economies, which can lead to wild swings in revenue from year to year. Meantime, depending on a small group of wealthy residents to fund an increasingly expensive state government has also helped lead Connecticut into its fiscal morass. An additional income tax hike would simply exacerbate the problem. But the larger question all Connecticut residents and businesses must ask is: When will the threat of tax increases finally end? Truth-tellers will say no time soon. No two-year budget plan that is currently under serious consideration will create long-term fixes for our fiscal crisis, which is being driven by exploding debt and retiree pension and healthcare benefit costs. Worse yet, lawmakers tied their hands once again by agreeing to a labor concessions deal that didn't go far enough in achieving savings taxpayers need and deserve. To his credit, Gov. Dannel P. Malloy has been resistant to raising new revenues, though he hasn't taken the option completely off the table. The second-term Democratic governor, who's already penned two of the largest tax increases in state history, said he's opposed to any major tax increase and he gave a very lukewarm reception to House Democrats' pro- posed sales tax hike. But his rhetoric must be matched by his actions; his legacy is at stake. Malloy said he won't seek re-election in 2018, so he has a little over a year to make his final imprint on the state. He'll most likely leave office without fully solving the state's fiscal crisis, but let's hope his final two-year budget veers away from the typical Democratic playbook in recent years that relies on tax hikes to make ends meet. OTHER VOICES Elimination of excessive prevailing wage will stimulate CT economy By Chris Fryxell C onnecticut is in a difficult position — our economy is sputtering, the state is grap- pling with a permanent fiscal crisis, our towns and cities are preparing for painful cuts and our unemployment rate is one of the highest in the United States. Given this background, I found it troubling to read a recent opinion piece in the Hartford Business Journal by Kim- berly Glassman ("Prevailing wage: Good for workers, good for business") arguing against a modest and reasonable increase in prevailing wage thresholds in Connecti- cut for the first time since 1991. For the uninitiated, prevailing wage represents the minimum wages and benefits the government re- quires an employ- er to pay construc- tion workers on a publicly funded project. Prevailing wage is much higher than the minimum wage and market-driven wages, and is based off of a formula created by bureau- crats. To put it another way, prevailing wage is a wasteful unfunded mandate on our towns and cities that substantially increases labor costs for construction projects and thus stifles economic activity, hinders investment in our crumbling infra- structure and increases costs for taxpayers. Every day open-shop construction com- panies build, repair and replace things for the private sector and they do so without the constraints of prevailing wage. These projects are done safely, efficiently and cost-effectively because the free market, not government, is allowed to drive the cost of everything from goods to wages and benefits. These companies are also provid- ing good jobs to middle class workers. The standard, market-based wages of ap- proximately 85 percent of the construction workers in Connecticut are lower than the "prevailing" wage mandate. What makes a public-funded project any different than a privately funded project in terms of the labor cost for construction? Nothing. Plenty of studies exist that counter the studies cited by Ms. Glassman. A recent report released by the Empire Center for Public Policy found New York's prevailing wage increases the cost of public con- struction by up to 25 percent. A report by Anderson Economic Group (AEG) found that Illinois spent an additional $1.6 billion on school construction due to prevail- ing wage over 10 years. In Michigan, AEG found prevailing wage costs the state $224 million annually. But, in reality, an academic study ought not to be required to prove something that is so simple to understand. When taxpayers foot the bill, the government makes them pay more for the same end product. Ms. Glassman cites our neighboring states' prevailing wage laws as evidence that we must maintain ours. Given our na- tional and global economy we cannot allow such parochial thinking to cloud our judge- ment. We don't just compete for economic growth in the Northeast, we are losing jobs to the south and west as well. According the U.S. News and World Report, the top three states for economic growth, three of the top four for job growth and four of the top five states for net migration don't man- date prevailing wage. The same report lists Connecticut as a dismal 44th for economic growth, 45th for job growth and 45th for net migration. That is where Connecticut will stay without making critical changes in the way the state does business. Because prevailing wage artificially increases the cost of construction projects it means towns may lose the ability to pay for projects that require prevailing wage or are unable to pay for additional necessary proj- ects, such as school renovations and road im- provements, due to budgetary constraints. Large projects turn into smaller ones, or are eliminated altogether. Money available for capital improvements is limited and, with prevailing wage, the dollars don't stretch as far. It's a simple fact: Fewer construction projects means fewer construction jobs. Town officials have grown accustomed to this reality and they know the tumultuous and unpredictable state budget situation adds further uncertainty for their shoe- string budgets. That's why it is curious that Ms. Glassman would openly dispute the facts that our town officials must deal with every day. The "I know your business better than you" mentality is largely responsible for the difficulties we now face as a state. The Connecticut Conference of Munici- palities doesn't run a construction com- pany and their members aren't seeking personal enrichment. They are fighting to make their towns better, increase their constituents' quality of life, grow a stifled economy, and make necessary improve- ments with as little impact on local prop- erty taxes as possible. Connecticut is down, but we're not out. We must recognize that we need the lifeline of free enterprise, not the anchor of govern- ment intrusion. Addressing the outdated prevailing wage laws is just one action we can take to encourage development, increase job growth and get our great state back on track to prosperity. Chris Fryxell is the president of the Connecticut Chapter of the Associated Builders and Contractors. Chris Fryxell Greg Bordonaro Editor It's understandable some Democrats want the state's wealthiest residents to shoulder more of the state's fiscal burden, but that strategy has proven ineffective in the past and will only contribute further to the state's long-term fiscal crisis.