Paul Bass Photo
Harp at WNHH.
Mayor Toni Harp weighed in on the state budget emergency Monday, calling for replacing the state’s current corporate income tax with a property tax.
Harp (pictured), a former state senator, made the remarks on her weekly “Mayor Monday” appearance on WNHH radio’s “Dateline New Haven” program.
She spoke in response to a listener question about the proposal by State Senate Democrats to wipe out the Clean Election Program, which offers matching money to legislative candidates who swear off special-interest money, to help close a $350 million deficit in this year’s budget. Democratic and Republican leaders are huddling with the governor to try to close that gap.
Harp reported that colleagues assure her the program is safe. It won’t be cut.
“I think it’s really important that that option remain. The way business is done at the state Capitol has so radically changed because of campaign finance reform,” Harp said. “I remember when I was early on [in her State Senate career], there were some lobbyists that were powerful enough to stop bills. That doesn’t happen anymore.”
Harp also questioned the proposed cuts in state Medicaid reimbursement to hospitals and doctors. Citing a conversation she had with New Haven State Rep. Pat Dillon, who has focused on restoring those cuts, Harp said, “42 percent of our industry here in New Haven is health care-related. So it matters to us whether or not we have a strong hospital. It matters to us whether or not our physicians are reimbursed adequately for Medicaid. We’re a huge Medicaid provider.”
Yes, filling a $350 million gap will require some painful cuts, Harp said. But she disagreed with the negotiators from both parties for taking off the table the option of raising some taxes, as well, in order to avoid some of the drastic reductions eyed for social services and urban aid. “You could raise [income taxes] a little bit. Do you really want to destroy our infrastructure? Or pay a little bit more?” Harp asked.
She also spoke of the need for a more reliable revenue stream, so the state doesn’t end up in these mid-year emergencies in the future.
Toward that end, she recommended over the longer term replacing the current tax on corporate earnings — which she said companies find “all kinds of ways to get around” — with a tax on corporate real-estate property and machinery.
That would provide more “stable” and “reliable” revenues to the state, she argued. It would also be “predictable” for corporate payers.
“It wouldn’t need to be all that high,” Harp said. Meanwhile, under the current system, “we can’t project what our revenue will be. That makes no sense. We have to come up with a system that is more stable.”
Connecticut Business & Industry Association lobbyist Brian Flaherty said Harp’s proposed change would “send a very troubling message right now” about retaining jobs in Connecticut.
Flaherty noted that many other states do not tax corporations’ property; it took a “long fight” to get Connecticut to stop taxing manufacturing equipment.
“It would be like putting a banana peel under someone’s foot just as they’re getting on their feet,” Flaherty said. “This is a time when the state has gained back eight and a half of every ten jobs lost in the recession. Last month we lost jobs. It would be like putting a banana peel under someone’s foot just as they’re getting on their feet.”
Flaherty, who served with Harp in the state legislature, said the proper place to discuss such changes in the tax structure would be with a new panel the legislature has set up—co-chaired by former legislators Bill Dyson of New Haven and Bill Nickerson of Greenwich — to look at reforming the system.
State Senate President Martin Looney of New Haven said Harp’s idea is “certainly worth exploring” when the legislature looks at longer-term budget solutions. It is not on the table for the current negotiations over a mid-year budget fix.
Looney said the legislature has cracked down on corporations getting around tax payments through a new “unified reporting” requirement that establishes in which state it did each part of its business.
He suggested legislators look at a “mansion tax” to add a statewide property tax on homes of the wealthy, beyond the municipal property taxes the homes’ owners pay.
Click on or download the above sound file to hear the full program. The discussion of the state budget begins at 42 minutes into the episode.