YOUR MONEY IS YOUR PROPERTY
Money is property. Whether it is tangible as dollar bills and coins or intangible as numbers on a bank statement, money belongs to someone. When you have a job and you work, you earn money. When you make and sell something or provide a service, you make money. When you save or invest money, you make money. When you run a business, you make money. The money that you earn belongs to you. When you have more money or when you have less money, there is a direct effect upon your family and you, positive or negative.
The taxes that you pay take money from you. It leaves you with less of the money that you earned. It is property that government takes from you. It is not for me in this article to discuss the pros and the cons of government taxation in general terms. The U.S. Constitution in Article I, Section 8 grants the Congress the “Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States” and to “borrow Money on the credit of the United States”. The courts have ruled that the government’s power to tax people is neither a violation of the 5th Amendment’s protection against being “deprived of life, liberty, or property, without due process of law“ nor a violation of the 5th Amendment’s prohibition of “private property be taken for public use, without just compensation”.
Therefore, because government has authority to tax you, it is most important that you know what your elected officials propose to do and actually do when it comes to taxing you. There are many ways you are taxed. When you earn money by working, you pay income tax, Medicare tax, and Social Security tax, along with taxes for other public programs. When you spend the remaining money you get in your paycheck, you pay sales and meal taxes. If you bought a car, you paid a sales tax and then pay an annual excise tax as long as you own it. When you use your car, you pay gas taxes (there are 3 of them per each gallon of gas in CT). When you have a phone, you pay many taxes (look at your bill to see them all). When you buy a house and the property it is on, you pay taxes and then start to pay property taxes. When you run your house with electricity or natural gas, you pay many taxes. Daily life is full of different taxes you pay.
All of these taxes add up bit by bit incrementally. Whenever government raises taxes, continues taxes scheduled to end, or adds new taxes, the situation is like the fabled frog that is slowly boiled in water. It does not notice the gradual changes that build up until it is too late to take action.
For you, each time you are taxed, you have less of the money you earned and less money you have for things that you need and want. For business owners, taxes take away capital that can be used to create more jobs, to provide raises or more benefits for employees, and to purchase equipment and other services.
Some degree of taxation can serve to provide the core government services we as a society depend upon. But, higher or more taxes, especially if both occur concurrently, can discourage people working, investing, and saving. It can discourage economic growth, innovation, and development. It is important to note and to remember that a sustainable, healthy way to foster revenue from taxes is by growing the economy and by increasing good jobs for everyone. It is unhealthy to do counter to these things through higher or new taxes.
Here in Connecticut, there were three, huge tax hikes: $1.8 billion in 2011, $900 million in 2015, and $1.7 billion in 2019. The initial CT income tax in 1991 was $1.1 billion, which today would be ~$2 billion after adjusting for inflation. These tax hikes remain in effect. Tax hikes remain in effect and then are added to in subsequent years, compounding the degree of taxation.
The state debt at the end of 2019 was ~$67 billion, which calculated to $50,700 per taxpayer (you). The state debt was 33% of the state’s gross domestic product. Numbers for 2020 changed due to federal payments to CT for the COVID-19 pandemic. Nevertheless, despite big tax hikes starting in 2011, CT has a budget deficit of ~$2 billion for the current fiscal year (that is, spending outpaces revenue by ~$2 billion). It is projected that CT faces ~$6.5 billion of deficits over the next 4 fiscal years. Even if CT used its entire $3 billion rainy day fund, that huge amount of money would not square away the totality of the projected deficits. And, fixed costs and contractual payments continue to increase for state government, worsening the deficit and debt situations.
Before the COVID-19 pandemic hit, looking at 2019 data, CT regained only 86% of the 120,300 jobs it lost during the Great Recession, the only New England state not to have recovered all jobs lost. In 2019, CT lost 2,100 jobs. From the end of the Great recession through 2019 (pre-pandemic data), the U.S. economy grew 25.5%, where as CT grew only 1.1%. The numbers for 2020 have varied during the pandemic, but the big job losses in 2020 have not yet been recovered fully as 2020 heads to a close.
CT faced economic and fiscal problems before the pandemic hit this year. Now, the headwinds of the pandemic are battering the state. Despite all of this, some elected officials in the state Legislature are calling for more taxes in order to deal with the budget deficits and increased spending proposals.
Many people are asking, “I’m a hardworking person who is trying to feed my family, how can I pay more taxes”? Others are asking, “I’m a hardworking person who is trying to keep my small business afloat and employees with jobs, how can I pay more taxes”? The more taxes you pay, then the less money you have. Money is property. It is your property. It is earned through hard work, entrepreneurial business risk, or wise saving and investment. Keep your elected officials accountable because it is easy for other people to spend your money. Keep the process of legislating and of running government transparent and accessible. Otherwise, the money you earn will continue to be taken away more and more over time. Before you know it, it will be gone.
Jeffrey A. Gordon, M.D.