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 boarder(s).

    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.