Malloy & Robinhood
Going After the Middle Class
Imagine or remember getting a
speeding ticket a few months ago, paying the $150 fine, then getting a
letter in the mail from the State of CT stating that another $30 is
owed. The letter states that speeding ticket revenues have fallen
because there are less people driving and people are driving slower, so
all fines retroactive to January 1rst are increased by 20%!
This IS reality to all those who hold jobs in CT,
with the difference being a higher withholding taking place soon, for
those who still have a job. For those who lost their job during
the year, be prepared for either a smaller than expected return or the
possibility of writing a check instead!
The old saying “The more one makes the more the
government takes” holds true only in a flat tax system. In the
current progressive tax system the truth is “the more one makes the
bigger portion the government takes” If “time is money” then tax rates
can be converted to time, given 3600 seconds in an hour. For
every 1% of tax rate, one must work for that taxing authority for 36
seconds of every hour.
The story of Robinhood, stealing from the rich and
giving to the poor makes for great press and Gov Malloy is willing to
ride Robinhood’s coat tails. But when one thinks hard, most can
figure out that Robinhood did not target the real rich, because many of
them had their own armies, mercenaries and / or body guards.
Robinhood’s source of income was really more like the middle class of
today, people who had something worth taking and from whom wealth could
easily be taken.
With regards to the income tax, Gov Malloy realizes
that CT is competing with other states. If CT becomes more
expensive than New York, he realizes that many rich CT residents could
easily become rich New York residents. So he’s careful not to
cook the goose that lays the golden eggs.
So, without raising taxes, how does Gov Malloy
increase revenue? He lowered the property tax credit, something
that benefitted the lower middle class. His next move is a little
bit hard to understand and explain, but simply put more people will be
writing checks to the DOR. Our current progressive tax system
comprised of many brackets charges a certain percentage for all income
that falls in between a lower and higher dollar amount. Currently
everyone pays the same percent on the first $10,000 of income, and
income beyond $10,000 is taxed at a higher rate.
For the lack of an official term, Gov Malloy is
introducing retroactive tax bracketing. Simply put with such a
system, one may pay their top rate on all their income, rather than on
just the income in that bracket.. The way one of the website
explained the concept was that the “marginal rate would be applied from
the initial dollar”. This will target the middle and upper middle
class by requiring them to pay a bigger portion of their initial income.
The wisdom and caution that went into the redesigned
income tax was defiantly not used when he did his multi-dimensional
expansion of the sales tax. Not only did the tax “get bigger”,
going up from 6% to 6.35%, but it also covers more area, less items are
exempt. Many people who used to come to CT to shop for
clothes at our many outlets and malls may choose to stay closer to home
because the purchase prices have jumped by almost 7%. Unless our
state sets up border patrols, many CT residents may cross the borders
as well to go shopping.
Sales tax revenues on other items will also decrease
because of the shopping exodus that CT will experience. Most
shopping trips involve more than just the former tax free items.
A trip to the mall, especially with teenagers involves food,
entertainment & games along with other taxable fashion accessory
purchases. In time we will know if Governor Malloy’s new taxes
are able raise revenue or if they pushed many shoppers over the
CT is at the point where some “poor” peoples’
standard of living is better than that who are fortunate enough to
still have a job. Rather than reassess the situation, Governor Malloy
is going to require most CT workers who have
jobs to work for the state for an extra half hour each week.