Although its early, the state fiscal year begins July 1, the battle lines are emerging on the state budget. Earlier in the year Governor Rell proposed a constitutional budget cap busting budget that focused on delivering more money for education. The legislature, crafted by the Democratic majority revealed a budget that broke the cap that included more money for health care. That’s the simplified version.

Each side claims high ground over the philosophical issues that line up Democrats with preserving services and tax reductions for the middle class and the Republican proposing property tax reflief for all and concerns over over-taxing “the rich.”

Yet, according to the Advocate:

The rhetoric on both sides is familiar, but no study appears to exist that would put the debate to rest.

“A lot of these discussions are based on people’s perceptions, not on any serious research,” said professor Fred Carstensen, director of the Center for Economic Analysis at the University of Connecticut. “One of the things we lack in Connecticut is any systematic, coherent, regular policy process that evaluates things like this. . . . The Democrats say (their tax hikes) are more equitable, and the Republicans are wringing their hands, saying ‘this is just awful.’ Could anybody point to any research, analysis, hard numbers?”

Carstensen said he does not believe the proposed income tax hike is a concern but said the inheritance tax’s impact on the wealthy deserves a look.

“If your taxes do get sufficiently out of whack, as the Connecticut business taxes did in the 1980s, you pay a price,” he said. “Connecticut’s economy clearly performed very poorly in that period.”

Neither the legislature’s Office of Fiscal Analysis nor the state Office of Policy and Management, which oversees state budgets, have studied whether high taxes drive out high-income residents.

The likely outcome is that a budget impass will occur, and Keith Phaneuf of the Journal Inquirer concludes:

For the Democrats, it’s simple. They simply don’t vote on a budget unless it’s one most of them like. Rell can’t adopt anything on her own.
Democrats also have shown they can attack Rell in other ways, such as their bills to weaken her control over state borrowing, if she’s not cooperative on the budget.
But while Democrats like to tout their potential to override vetoes, that doesn’t work in the budget arena because of the special rules that apply whenever spending exceeds the constitutional cap.
Any proposal to spend in excess of the cap requires a written declaration of fiscal emergency from the governor.
So even if the entire General Assembly wants to spend in excess of the cap, it cannot do so without Rell’s declaration.
And given that the Democrats’ plan blasts through the cap by more than $800 million, they must work with Rell. The only way to craft a plan under the cap would be to gut their health care and other new initiatives and reduce current services in many areas.
“The governor has made it clear she is willing to sign the declaration to reform the education financing system - not as a license to spend in any area,” Rell’s budget director, Office of Policy and Management Secretary Robert L. Genuario, said last week.
And if Rell insists on a budget that falls under the cap, she says good-bye to her own education plan - since it pushes her budget $521 million over the cap.
July 1 is the real deadline
And what happens if no new budget is in place when the 2007-08 fiscal year starts on July 1? In that event, the 2006-07 budget remains in effect, and programs must get by on current spending limits without any adjustment for inflation.
The last time that happened was in 2003, when Rowland and Democratic legislative leaders fought into early July to close a projected deficit of more than $1 billion. It forced cutbacks primarily in social service programs.
“I don’t think anyone wants that,” Rep. Cameron C. Staples, D-New Haven, co-chairman of the Finance Committee, said this week. “Once we start talking, I think we have a good chance to work things out. It will just take a while.”

source: Norwalk Advocate, State looks for the tipping point on taxes, By Brian Lockhart, April 22 2007