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Connecticut Must Act To Blunt Tax Reform Harm

The dust may be settling now, but make no mistake, the Republican tax bill passed in Congress this month represents a brazen attack on Connecticut.

Our residents wind up footing the bill for benefits that largely go to red states.

There's not really a debate about this: Republicans readily admit it.

Republican Rep. Lee Zeldin of New York complained to The New York Times that the tax bill is a "geographic redistribution of wealth" from affluent Northeastern states to the rest of the country (he opposed it).

When asked if he was concerned about the tax bill's effect on Connecticut residents, President Donald Trump's budget director Mike Mulvaney callously asked the Connecticut Post, "Is it the federal government's problem that Connecticut is having such difficulty?"

But the bill is now law. And lawmakers in Connecticut now need to figure out what to do.

Fortunately, we have some options. And my hope is that lawmakers of both parties can find common ground on a few common sense reforms.

First, we need to tweak the tax code to address some of the most serious problems created by the new bill. To do so, legislative leaders should immediately convene a blue ribbon commission to fast track reform this tax year.

The decision by Congress to cap the State and Local Tax Deduction, known as SALT, hurts Connecticut residents more than those of any other state except New York, according to the nonpartisan Tax Policy Center. But if we move quickly, we can blunt this.

For example, among the ideas I have heard, we could reconfigure our income tax to make it an employer-side payroll tax — as the new tax reform law still allows corporations to claim state-and-local tax deductions, just not human beings. Tax receipts would stay the same — but Connecticut taxpayers would effectively keep their federal SALT deductions. Or we could allow people to donate a portion of their income tax payment to a designated state-run nonprofit — perhaps the State Education Resource Center Foundation, claiming a federal charitable deduction that way.

Regardless of which way we go, we need to act quickly.

Second, we need to stabilize health care in Connecticut.

By eliminating Obamacare's individual mandate, the Republican tax bill deliberately tries to create a death spiral in our health insurance markets. That will hurt everybody — driving up costs for employers, taxpayers and those of us who still have insurance, and also destabilizing insurance companies and hospitals.

We should follow the suggestion of Lt. Gov. Nancy Wyman and create our own individual mandate — something Massachusetts did with bipartisan support. We could then use the revenue generated to make health care more affordable. That could mean setting up a reinsurance system to make health plans more affordable or helping poorer families cope with premiums and out of pocket costs.

Personally, I would support taking bolder action: creating a public option for health insurance and making our tax system more progressive. But at a time when Connecticut is fiscally constrained, divided on party lines and our state Senate is split 18-18 between Democrats and Republicans, we need to find pragmatic policies we can pass in 2018.

I don't know if these suggestions will gain enough support to go anywhere. But I do know this: We cannot afford to sit on our hands.

The impact of this tax bill on our entire region could be staggering. If we do nothing, it is possible that hundreds of thousands of Connecticut residents could lose their health insurance. By 2027, the Congressional Budget Office and Joint Committee on Taxation estimate that an additional 13 million people will be uninsured across the country.

By 2027, most Connecticut families will see higher income taxes, according to the Tax Policy Center. Connecticut home values could drop by 10 percent or more, according the National Association of Realtors. So we need to do something.

So let's move now — and who knows, if we move faster than regional competitors like New York, it may give us a leg up.

Matthew Lesser is a Democratic state representative for Middletown.

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