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Taxes Chased GE Out of Connecticut
GE in Schenectady
GE’s decision to leave Fairfield for Boston is another sad marker in the downhill slide brought about by Connecticut’s high-tax, high-regulation, anti-business policies of the last 25 years.
Governor Dannel Malloy (D) accelerated the state’s economic freefall with another huge tax hike passed last summer. Despite his 2014 reelection promise of no new taxes, Malloy signed a $2 billion tax hike that falls heavily and businesses and individuals. This came only a few years after his near $1.5 billion tax hike.
Does anyone doubt that massive tax hikes on successful earners and corporations drive those same folks out of state? That’s the new Connecticut story. A recent Pew poll shows that 60 percent of current residents want out.
Meanwhile, Connecticut’s economy and rate of job creation have only recently recovered to pre-recession levels. So it took Connecticut eight years to get back even. Not new growth or new job-creation — just even.
Hartford politicians don’t understand that you can’t have higher paying jobs without successful businesses to create them. Punitive taxes on business, however, cause job shrinkage. Plus, you can’t start a business without investment. Here, too, punitive taxation stops investment cold and ends the dream of more higher-paying jobs.
Who suffers from anti-business tax and regulatory policies? Middle-class families.
By the way, has anyone heard U.S. Senator Richard Blumenthal, a career Democratic politician of 35 years, ever utter one peep of protest against Connecticut’s ruinous decisions to punish business? Just asking.
But get this: From the Connecticut governor’s office on down, Democratic officials argue that the GE move to Boston had nothing to do with taxes. Instead they say it was an effort to merge with Boston’s high-tech culture.
There’s a grain of truth to this, although Connecticut does boast Yale, Wesleyan, Trinity, and Sacred Heart University’s business school (named after great former GE CEO Jack Welch). But this taxes-don’t-matter argument is malarkey.
When you tax something more, you get less of it. Art Laffer’s famous curve has kicked in with a vengeance in Connecticut, where higher tax rates are producing lower-than-expected tax revenues and killing jobs and growth.
It’s no coincidence that well-to-do residents are moving to zero-income-tax Florida, and major corporations like GE are seeking greener pastures. It’s also no surprise that GE CEO Jeff Immelt began talking publicly about a corporate relocation right after Connecticut passed its gigantic tax hike last summer.
That Democratic tax hike included a slew of corporate-income-tax increases, coming to roughly $500 million. At 9 percent, Connecticut’s corporate tax is now fifth-highest in the country. And switching the state to combined-income reporting (including out-of-state GE income) was a killer. Additionally, sales taxes on everyone were raised while property tax credits were diminished.
Connecticut has the second-highest property tax in the nation, ranking 49th out of 50. The Tax Foundation ranks Connecticut 42nd out of 50 in terms of tax climate (Massachusetts ranks 24th), and second highest in terms of state and local income-tax collections per person.
Massachusetts? It dropped its corporate tax to 8 percent from 9.5 percent and has a flat income tax of 5.15 percent. Connecticut, on the other hand, jacked its corporate tax to 9 percent from 7.5 percent and its top income-tax rate to 6.99 percent from 5 percent.
These are sizeable differences in favor of Massachusetts. Taxes don’t matter?
And the dirty little secret is that the pension and health-care benefits of the government unions — which dominate Democratic state politics — are roughly 50 percent unfunded. This spells many future tax hikes. GE’s Immelt knows it.
Not all the blame goes to Democrats. Connecticut’s first personal income tax was put in place by Republican governor Lowell Weicker. And Republican governors ruled for 16 years prior to Malloy’s victory in 2010.
And in last summer’s budget battle, I don’t recall any Republican initiatives to slash business taxes.
One of the key points in the Connecticut disaster is that while big corporations can get $100 million in tax credits, the woman running a small struggling business in Naugatuck gets nothing. But she’s paying for GE’s tax credit.
Connecticut’s high-tax policies do not soak the rich. The rich leave. Meanwhile, exorbitant tax and regulatory burdens slam the middle-class wage earners who have been losing take-home pay for years.
But you know what? This can be fixed. There are positive policy options. Connecticut needs a large dose of free-market capitalism. Roll back the overtaxing, overregulating, and overspending. It can be done.
But the political class in Hartford has to be overturned. Non-political citizens should run for office, vowing to restore incentive rewards for successful entrepreneurs, hard-working middle-class folk, and existing large and small companies. That will unleash growth, investment, and risk-taking.
Change can return Connecticut to greatness. In fact, change can restore the national economy, too.
Let’s get working.
Published in Culture, Economics
A Democrat is someone who sincerely believes if a 75% tax rate generates insufficient revenues the obvious solution is to double it to 150% so the government can have even more money to spend — and cannot comprehend the mathematical barriers to this approach.
Seawriter
When Taxachucetts is seen as the more business-friendly jurisdiction, that says something.
As a member of the 60% I say – Run, Larry, Run! Connecticut needs you.
After 22 years in our house in Wilton, CT we moved to Florida. I lived in Connecticut for 28 of the last 33 years. Taxes, cost of living, roads, traffic, it’s gone from bad to worse to unbearable. Larry, I have friends in Fairfield County that want to volunteer for your campaign. Say the word!
PS – Mr. S was high school classmates with Dan Malloy (Westhill 1973, that school’s first senior class). Dannel was running for class president when my husband came to Westhill, and he’s never stopped. Mr. S was not impressed.
I am a refugee from the PRCT. Along with the “PRCT,” I also call it the “Nutmeg Curtain.”
OK as a Connecticut resident that REALLY wants out but can’t leave because my husband doesn’t, I would love some change in this God awful state. If any sane person runs for office of governor, senate, state senate I don’t care I will vote for you because what we have now is a disaster.
This GE Thing has really gotten me pessimistic this week.
You were prescient to leave when you did. We are getting ready to sell our house, and the state looks like a forest of for sale signs. I am dreading it.
I have a question on a point of Ricochet etiquette. Since this discussion thread is about the economic and population problems of Connecticut, and since I know about these problems first hand, I would like to post a link to a satire which I wrote on this subject. Is it bad form to comment to this thread with the link?
If so, I will create my own post.
Best to create your own post and we can discuss it there
Just this week? I admire your optimism.
Seawriter
Ok this week more than usual. I’ve been trying to get to Houston for 5 years now.
There are already excuses in the hipster quarters; “Oh, it had nothing to do with taxes. GE just knew that younger engineers and professionals want to live in places with culture, food, happening stuff. They want concerts, good coffee, and downtown lofts. This was all about GE attracting talent“.
Last year I had the happy experience of listening to someone say, “I like paying taxes.” This person had moved from high tax CA to low tax TX. Beware of progressives moving to low tax states.
I moved to Texas from CT 3 years ago but kept my house for visiting the grandkids….Mistake, will now sell the house and rough it when visiting. Leaving was the best thing I have done in years
Like locusts that eat up their fields, and then move on to yours.
I also have a spouse who doesn’t want to leave our failing, corrupt, one-party state (California). Every time I bring up a place that might be more amenable to our lifestyle (Christian, gun owning, politically very conservative) she throws the weather card down. Let me tell you there is more to life than nice weather. I’m going to keep working on her. If Gavin Newsom (our oleogenous Lt. Governor) gets his draconian gun bill on the ballot and it passes that may be the last straw for me.
They’ll just have to move again in a few years. They should have just bitten the bullet and moved directly to Houston.
GE is one company I would encourage to move anywhere but Texas. They are a poster child for crony capitalism. I really do that wish to encourage crony capitalists to come to Texas any more than I wish to encourage blue-state liberals to move to Texas and bring their tax-and-spend attitudes with them.
Back when Boeing chose Chicago over Dallas for its headquarters I was disappointed. Now I am glad it turned out that way. I cannot think of a city or a company that deserve each other more than Chicago and Boeing.
Seawriter
Maybe why they didn’t move to TX is that they couldn’t be the cronies they wanted to be there.
I recently fled from California to Nevada. Give it a few more years, and then we will have to build a wall around California in the model of Escape From New York. After that, Trump can do his round-up of illegals, and instead of deporting them to Mexico he can ship them to Los Angeles, where they will fit right in.
Yeah, I know it’s all unconstitutional. But, as they say, the Constitution is not a suicide pact. And California is in the process of committing suicide. The rest of the country is not required to go along.
States should forbid new residents from voting for 10 years.
As another CT resident planning his escape there is another factor beyond the immediate tax situation. The state’s financial trajectory is unsustainable long-term. No matter what short-term promises the state makes to businesses or individual taxpayers there is simply not enough money in the current revenue structure to support the state. They’ll be coming for more and no one wants to be among the few left when that happens.
I was raised in CT and lived in Massachusetts during the 1980s. If you had told me then that 30 years later that it would Mass. that would have by far the more stable and fiscally sound state government I would not have believed you.
In my opinion, the companies that have moved jobs overseas didn’t leave, they were run out. The government in this country is anti business.
So maybe there is hope then, but it will be long and really hard decisions will have to be made. What these politicians need to think about is that Connecticut has no big cities to attract the big bucks. Fairfield County is commutable to NYC, so we have the wealthy folks that work in the city and the hedgefunds who’s CEO’s live in Connecticut and don’t want the commute. But other than that what would attract a large company to come? Connecticut is what you have to drive through to get from New York to Boston and not much else to the majority of people. Connecticut was fine when it was the most finacially sound state surrounded by high tax, high regulation states. Connecticut, was a kind tax haven for a lot of rich folks and now that the state is no longer that those folks are getting out. I work in shipping and we have lost a lot of companies in Connecticut to Texas, also UBS is downsizing, the gun manufacturers have left.
What are these people thinking? They will turn the state into Detriot, Bridgeport bascially is. Sad when your states largest city electes a mayor who was convicted for corruption.
Actually, I don’t have much hope. This is a piece I wrote for Ricochet a few months ago summarizing the situation in the state . When things get bad fiscally there is a period when you can correct them but when it goes go too far they pass a tipping point, which I fear CT has.
Agreed. And Hillary Clinton wants to invent better shackles to keep them here, rather than addressing the reasons that they leave.
Why let a good enemy go to waste? She and hers are not hurt by a bad economy. Quite the opposite. The worse the economy gets the more others depend on the government. Not addressing the reasons businesses leave is a feature, not a bug.
Seawriter
Larry3435: #21 “Trump can do his round-up of illegals, and instead of deporting them to Mexico he can ship them to Los Angeles, where they will fit right in.”
That is a great quip. Thanks. dt
Sadly, yes.
When I was a boy there was a story about the goose that laid the golden egg. I believe the goose was killed, and the golden eggs stopped coming.