Tax Day Reality Check

Back • Publication Date: April 15th, 2011

Authors: Michael Sullivan

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The severe national economic downturn has meant that the needs of Connecticut residents have grown, but the state revenues necessary to meet those needs have declined. Calls for huge service cuts in response to this economic crisis, as well as concerns about the impact of potential tax increases on wealthy residents, are based on misconceptions.

Connecticut's public revenues and spending have remained lean and stable for decades. A review of state revenue and spending trends indicates that the state faces a budget crisis caused by a declining economy and some short-sighted fiscal choices, rather than a problem of overspending. For example, Connecticut's state and local government has not grown as a share of the economy since 1970. Connecticut's state and local government is the 5th smallest in the country, relative to the size of its economy.

There is little evidence that income tax increases will motivate wealthy residents to move. Research by the Political Economy Research Institute at the University of Massachusetts found that employment and family concerns are the main reasons that families move, and the impact of taxes on choices about where to live is very weak. Family ties, comfort with the community, jobs, the costs of moving, and valuing public services in the state are the reasons families stay put, regardless of their state's tax rates.

To meet the gap between the needs of families and declining revenues, Connecticut must take a balanced approach to reducing the deficit and maintaining vital services that includes revenues. A solution must be based on a clear-eyed, factual assessment of Connecticut's state and local tax picture, not misconceptions.