STATES’ FISCAL CRISES : Public Outrage High in Connecticut Over Plan for Income Tax : Such a measure has not been tried since 1976. Widespread anger shows budget-cutting proposal is fair to everyone, Weicker says.

Lowell P. Weicker Jr., the former maverick Republican senator who won the governorship here as an independent last year, is no stranger to controversy. But perhaps nothing in his political career matches the furor he has aroused in recent weeks with his radical plan for dealing with the state’s mounting fiscal troubles.

Besides deep cuts in spending that affect almost every constituency in the state, Weicker’s budget program also calls for a dramatic overhaul of the state’s tax system, including the imposition of what has long been considered political anathema in this state--a personal income tax on wages.

“Everybody is mad,” Weicker said in an interview. “And since everybody’s mad, I think it pretty well speaks for the fairness of what we’re doing. There’s nothing good in there, on either the spending side or the revenue side.”

Around the country, state governments are striving desperately to ward off fiscal chaos as the recession continues to decimate revenues while adding to such expenditures as unemployment insurance and welfare benefits. According to various surveys, about three in every five states are wrestling with severe budget shortfalls this year.

“You can pretty well draw a line down the Mississippi River,” said Marcia Howard, research director at the National Assn. of State Budget Officers. “California is the only state west of the line that’s really bad off. The worst off are the states in the Northeast.”

But in none of the deficit-plagued states has a governor dared to call for such bold budget-balancing steps as Weicker has in Connecticut, where the cumulative budget shortfall for the coming fiscal year already tops $2.6 billion and continues to climb. That figure amounts to more than 30% of next year’s total spending, the highest percentage of any state in the country.

Under Weicker’s plan, Connecticut would levy a flat-rate tax of 6% on all adjusted gross income above $12,500 for an individual and $25,000 for a family. The proposal would drop the corporate income tax to 11.5% from 13.8% and cut the state’s 8% sales tax almost in half to 4.5%, although the sales tax base would be expanded to include such currently exempted goods and services as clothing, gasoline and haircuts.

Weicker’s move is filled with political peril. No state has ventured to initiate an income tax since New Jersey adopted one in 1976. And Weicker says his experiment in Connecticut is being watched closely by governors elsewhere, particularly those in states such as Tennessee and Texas, which also have no income tax but have come under growing fiscal pressure to adopt one.

“If I have my head handed to me on a platter, I think they’ll figure out some other method for their state,” he said. “If I survive--and I think I will--maybe that will give them encouragement for what they’re looking for.”

Since Weicker introduced the plan in mid-February, however, the ornate Victorian Gothic state capitol in downtown Hartford has become the scene of almost daily protests by irate citizens--most of them prompted by the $1.2 billion in spending cuts Weicker’s new budget proposes along with the restructured taxes.

In the largest public demonstration so far, more than 5,000 parochial school students ringed the capitol to vent their anger at the $11 million the governor wants to eliminate in state funding for transportation and health services at Connecticut’s private schools. “Throw the bum out!” one student yelled at Weicker as the governor arrived for work with a heavy police escort amid the surging crowd.

Meanwhile, anti-tax groups have mounted a petition campaign to beat back the governor’s proposal, and Republican and Democratic legislative leaders are mulling over a GOP plan devised just last weekend that its architects contend would remedy the state’s fiscal ills without resorting to what they consider political suicide.

Connecticut is one of 10 states without a broad-based income tax, and the last time the Legislature tried to impose one, public outrage forced them to repeal it within weeks after it was enacted. The specter of that debacle in the early 1970s haunts every state legislator as Weicker’s plan is debated.

“The governor’s stance is what ‘Profiles in Courage’ was written about,” said Democratic state Sen. William DiBella of Hartford, co-chairman of the Legislature’s joint finance committee. “But the reality is the governor runs for reelection in 1994 and the Legislature in 1992. When you get people with their constituency writing in 70% to 75% against an income tax, then--profiles in courage? There aren’t many legislators who would measure up, especially those in tight districts.”

For his part, Weicker maintains that he had no alternative.

“I fought like hell to do this thing without an income tax when we were devising the budget,” he said. “It just didn’t work. It would have worked for eliminating the deficit but it wouldn’t work for eliminating the reasons for the deficit.”

Chief among those reasons, he says, are Connecticut’s corporate income tax--the highest in the nation and, Weicker contends, a drag on new business investment--and the state sales tax--also the highest in the nation but extremely sensitive to ups and downs in the economy.

Under current laws, more than 50% of the state’s revenues are drawn from these two sources. Under the governor’s proposal, that share would be reduced to around 32% while the personal income tax would bring in almost 30% of all revenues.

Perhaps not surprisingly, major Connecticut business organizations have endorsed Weicker’s plan, although they say their support is contingent on legal limits also being imposed to control state spending growth, either through a constitutional amendment or through statutory provisions.

“We . . . came to the conclusion that if the governor could deliver what he was advocating and add to that what we call enforceable long-term spending control, then that to us would improve the business tax climate,” said Kenneth O. Decko, president of the Connecticut Business and Industry Assn.

Decko said that in the last five years, Connecticut has lost almost 20% of its manufacturing jobs, lowering the total number in the state to around 350,000. “And we started losing these jobs before the current recession set in,” he said. “Our business climate has been deteriorating for years. The governor’s proposal, along with the conditions we’ve added to it, will help turn this around.”

Those conditions--formal spending controls--are what might ultimately sell the proposal to the public, contends G. Donald Ferree, a University of Connecticut political scientist and polling director at the university’s Institute for Social Inquiry.

According to the most recent survey he conducted, Ferree said that anti-spending sentiment exceeds anti-tax sentiment among Connecticut residents.

The poll, made last month, showed that 71% of respondents felt that spending was too high while 60% felt that taxes were too high--an almost exact reversal from January of last year, when 73% said that taxes were too high and 60% said that spending was too high.

“The political wisdom has overestimated the extent to which the income tax itself is an issue,” Ferree said. “The public will grow warmer toward an income tax as they are convinced of the necessity for new revenues of this magnitude and as their fears lessen that it is simply a license to spend.”

At a recent public hearing on his budget proposal, Weicker indicated a willingness to accept limits on the future growth of state spending.

He also has gone on television and radio several times in efforts to avoid repeating the bitter experience of New Jersey Gov. James J. Florio. Florio spent a lot of time winning legislators to his 1989 tax reform plan but he failed to make sure that taxpayers knew its principles. Later, when taxpayers discovered how deeply the plan actually hit them, they staged a revolt that still has politicians trembling.

But the Legislature still remains the big stumbling block in Connecticut. Republicans hold 63 of the 151 seats in the House and 14 of the 36 seats in the Senate, thus representing a formidable bloc--particularly when conservative Democrats are counted in.

State Rep. Edward C. Krawiecki Jr. of Bristol, the House Republican minority leader, contends that Weicker’s proposal is already dead.

“Once the early part of May comes around, a coalition of Democratic moderate and conservative senators and House members will join with Republicans to produce a bipartisan budget without an income tax,” he predicts. “The real question is what will the guy who lives on the other side of this hall do with that budget when it comes to him.”

Connecticut Profile Capital: Hartford Governor: Lowell P. Weicker Jr., 59, Independent Population (1990): 3,287,116 Key Industries: manufacturing, retail, services, finances, insurance, real estate. Sales Tax (1989): 8% Income Tax: none Fiscal 1991 revenue, estimated in billions Revenue: $6.03 Shortfall: $2.6 (1991-1992) Per capita income, 1989 Connecticut: $24,604 U.S. average: $16,490