Does Connecticut’s Governor Finally Comprehend Dangers of “Taxing the Rich”?
“Malloy has spent two terms treating business as a bottomless well of cash”
Connecticut governor Dannel Malloy (D) is facing a situation that may make him reconsider his position on taxing the wealthy. Aetna insurance company, based in Hartford since 1853, is looking for a new state to call home, a state that is more business-friendly in terms of taxation.
Having lost GE to Boston last year due to the massive tax load piled on businesses, Malloy is desperate to keep Aetna in Connecticut, but it may be too little, too late.
The Wall Street Journal reports:
The Aetna insurance company has been based in Hartford, Conn., since 1853, but this week it said it is looking to move to another state. Governor Dannel Malloy has pledged to match other states’ financial incentives, but taxpayer money can’t buy fiscal certainty and a less destructive business climate. That’s the real problem in Connecticut, which saw GE vamoose to Boston last year and which even Mr. Malloy now seems to recognize.
“As a huge Connecticut employer and a pillar of the insurance industry, it must be infuriating to feel like you must fight your home state policymakers who seem blind to the future,” Mr. Malloy wrote in a May 15 letter to Aetna CEO Mark Bertolini. “The lack of respect afforded Aetna as an important and innovative economic engine of Connecticut bewilders me.”
Now he tells us. Gov. Malloy has spent two terms treating business as a bottomless well of cash to redistribute to public unions. Now that his state is losing millionaires and businesses, he has seen the light. But the price of his dereliction will be steep.
Connecticut has lost tax revenue at an alarming predictable rate since its governor began enacting crippling “tax the rich” policies in the state.
The problem, as always with such “sound good, feel good” policies of the regressive left, is that companies are under no obligation to stay put and shell out billions; they can pick up shop and move elsewhere to enjoy lighter taxation.
The Wall Street Journal continues:
Last month the state Office of Fiscal Analysis reduced its two-year revenue forecast by $1.46 billion. Since January the agency has downgraded income-tax revenue for 2017 and 2018 by $1.1 billion (6%). Sales- and corporate-tax revenue are projected to fall by $385 million (9%) and $67 million (7%), respectively, this year. Pension contributions, which have doubled since 2010, will increase by a third over the next two years. The result: a $5.1 billion deficit and three recent credit downgrades.
And it’s not just businesses leaving Connecticut under the strain of high taxes, individuals are doing so, as well.
According to the fiscal analyst, income-tax collections declined this year for the first time since the recession due to lower earnings at the top. Many wealthy residents decamped for lower-tax states after Mr. Malloy and his Republican predecessor Jodi Rell raised the top individual rate on more than $500,000 of income to 6.99% from 5%. In the past five years 27,400 Connecticut residents, including Ms. Rell, have moved to no-income-tax Florida, and seven of the state’s eight counties have lost population since 2010. Population flight has depressed economic growth—Connecticut’s real GDP has shrunk by 0.1% since 2010—as well as home values and sales-tax revenues.
Malloy, whom the WSJ calls a “slow learner,” is finally getting it. He’s resisting further tax increases and seeking $1.6 billion in union concessions.
The Governor—a slow learner—seems finally to have accepted that raising taxes on the wealthy is a dead fiscal end. Democrats are now proposing higher taxes on tobacco, expanding casinos and eliminating some tax breaks, though they don’t want to touch an exemption for teacher pensions. The state teachers union warns that axing the exemption would impel retired teachers to relocate. A quarter of pension checks are currently sent out of state.
Mr. Malloy is also seeking $1.6 billion in concessions from unions, which would be easier to achieve if collective bargaining weren’t mandated by law. He’s suggested increasing municipal pension contributions and cutting state-revenue sharing, both of which could drive up property taxes and imperil insolvent cities like Hartford. Mr. Malloy’s budget includes a $50 million bailout for Hartford to prevent bankruptcy, which might occur in any case if Aetna—its fourth largest taxpayer—leaves.
Watch the report:
Wherever Aetna and Connecticut’s disgruntled, over-taxed wealthy land, those of us in more business-friendly, less-taxed states think it best that they leave the politics that created these problems behind.
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Comments
“Having lost GE to Boston last year due to the massive tax load piled on businesses…”
Why bother? That’s jumping from the frying pan into the taxation fire. GE should have moved to Texas for some REAL business appreciation.
The city of Boston provided a load of incentives for GE to moves its HQ to the Seaport (eg South Boston).
The tax environment here is better that CT and GE really wants to tap into the innovation district that has developed in that part of town…. CT can’t come close on that front.
On the other hand Dems in MA are now openly talked about introducing a graduated income tax in MA (which requires changing the MA constitution) so GE’s stay may be a short one.
Boy, I’d hate to live in Connecticut, where the Dimocrats have everything so screwed up.
Sure glad I live in Illinois.
¯_(ツ)_/¯
Or Washington state.
Or California.
And here I thought that only cities like Chicago, Detroit, Philly, LA, and so forth could be labeled “Democrat Centers of Excellence”. Now we have entire states vying for that honorable moniker.
I live in Connecticut.
It’s not just the taxes–it’s also the attitude of the Dems and the state governing class. Everything they do is in your face.
With GE, GE had told the leaders that certain proposed laws would drive them out of the state. The Democrats said F-U and passed them gleefully. So GE announced it was leaving and the same Dems cried and said how horrible GE was to “abandon” the state.
The state treats all businesses as criminal enterprises and does everything possible to make life hard for them, but grabs their tax dollars to stay afloat.
Texas or Florida spring to mind- no state income tax and businesses are welcomed.
Good idea, as long as the corporate entity only moves, and we keep the blue-state morons in their own wrecked state.
Nix on Florida, the state that unhesitatingly jumped in to join the lynch mob and appease the howling black mob.
“If I had a son, he would have looked like Trayvon”
To be fair, Florida also had the jurors who found Zimmerman not guilty.
I have yet to see any evidence that these marxist parasites EVER learn anything about economics. Connecticut will continue to tax and spend itself into oblivion, the moronic citizens of that great state will continue to vote these dems into power, nothing will change.
“I have yet to see any evidence that these marxist parasites EVER learn anything about economics.”
Like duh – over at skeptical science – the morons were trying to explain that staying in the Paris accord was going to help with a 3% GNP increase – because – renewable energy was employing more people than oil , gas and coal energy combined. even though renewable energy only produced less than 4% of the total energy/electricity. They didnt seem to understand that employing 20x then number of people to produce the same quantity of energy was less efficient. It also got me banned from Skeptical science.
even there are more jobs in
http://instituteforenergyresearch.org/topics/policy/green-jobs/
That reminds me of a famous story about Milton Friedman, when he was visiting China. The local commissar was eager to show him some big canal project (iirc) and bragged that “we don’t use expensive equipment like you Americans, we make jobs for thousands of our people by having it all dug by hand, with shovels!”
To which Friedman replied, “Well why don’t you have them dig it with teaspoons, then?”
oh, and I know from experience (as do many) that anyone who shows even the slightest aptitude for mathematics or logical thought will be instantly found guilty of thought-crimes and banned for life from “skeptical science”. (notable because both words in their name are frauds)
Global Warming Climate Change? How about that Tax Climate Change!
let’s see, who keeps voting them in? you get the representation you deserve…
There is one word that describes all of the woes of any fiscally unsound state and that word is “Unions”. Short sighted pols have promised benefits to the unions that gradually become unsustainable. Now all of the “Modest” benefits have grown into monsters that no state can afford. The federal unions have the advantage of all us taxpayers whom they can tap endlessly. No Congress critter will ever stand up against them let alone a president. I hope I am around to see what happens to a bankrupt blue state and God help us if there is a liberal in the WH and a Demorat Congress! We all know that they will bail them out.
You may not have to wait long… IL is well on its way.
Does anyone care about Connecticut? I live in NJ and they are next.
Gov. Malloy has the age old political problem:
A conservative will believe it when he sees it, but a liberal will only see it when he believes it. Money does run out.
There’s a good article on Forbes that I read a while back titled “How Did Rich Connecticut Morph Into One Of America’s Worst Performing Economies?” From the history its clear that Connecticut’s state governments were always more focused on getting larger and larger slices of the pie rather than trying to expand it, and that the mindset goes back decades. Not unique to the state unfortunately, but their example is illustrative for sure.
The Democrats have a mutual relationship with the State Employee Unions. The give the unions and its members generous wages, benefits and working conditions. The Unions reply in kind with generous donations to the Democrats campaign funds at election time, one hand washing the other style.
When the budget crunch came in his first weeks in office Malloy laid the biggest tax increase in the states history on its residents promising more savings in state employee union givebacks. Over time those givebacks, and the accompanying savings, vanished through court orders arbitration, or contract violations. Malloy played the sane ‘Ground Hog Day’ script every budget for 8 years, tax increse supposedly accompanied by employee union labor savings that promptly vanished.
In another era Malloy would have made a great snake oil salesman, selling his products out of the back of a Conestoga Wagon.
Reason #14,301 why Connecticut is boned, and it’s in the WSJ article, though they treat as if it’s something everyone knows:
The retired teachers in Connecticut are given an tax exemption on part of their retirement income. See it here:
http://www.ct.gov/trb/cwp/view.asp?Q=558106&A=1598
You read it correctly — after 2017, half the pension a teacher receives is exempt from state income tax.
Yes, Connecticut is boned.
Imagine the future in about 20 years, when Connecticut is broke and a majority of voters are black or brown (most affluent whites having left for more friendly areas)
What will their reaction be when they find out that no matter how much they tax themselves, no matter how much they collect. a huge part of it is required to be sent out of state to a bunch of old white people?
What do you think they’ll do?
Squads of police and accountants visiting each state resident reporting a positive income for the year demanding they be shown each asset the resident owns, then demanding a tith from each asset. If you have to sell your home in order to pay, so be it.
So many votes to buy, so few revenues. Theme song of the Democrats in Hartford.
Somewhere about 2005, the Democrats laid a one per cent surcharge on North East Utilities, the state’s largest electricity supplier, then the next day the Public Utility Control authorized a one per cent increase in utility rates for NU. The biggest complaint overheard from customers coming through the store was about “That GD North East Utilities raising their rates again”
Nice little sleight of hand there. Never laid a glove on the Democrats
The argument is that without the tax break, retired teachers will leave the state, depriving the state of 100%, not 50%, of their income tax.
Of course, this does not deal with the fact that the argument applies equally to any pensioner. See, e.g., ex-Governor Rell, who is now spending her untaxed pension is sunny Florida.
The honest argument is – the teachers’ union is one of the most powerful political forces in the state, basically an arm of the Democrat Party, so shut up!
The Commentocracy is being too hard on the guy. He’s not making any mistake that the Federal government hasn’t been making for many decades. And that is the failure to realize that when it becomes too expensive to conduct business in one location, companies move to another location. They move from Connecticut to Massachusetts; or from the United States to wherever—Mexico, Singapore, wherever mandated expenses are less extreme.
Heh.
Soaking the rich works – until you run out of rich people.
Apparently Gov. Malloy thinks or believes he lives in a glass house. He should be concerned with the amount of Jobs he has taken from People lately.
Lets watch the outcome.