After GE’s announcement: What should Connecticut do now?

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Since GE announced it was moving out of state, we’ve seen two types of responses – the cheerleaders who pretend this is just an aberration, and the doomsayers who have already started packing their bags.

The better response is probably somewhere in the middle. Let’s first admit we have some problems and figure out what they are, and then let’s figure out what to do to about them.

With that in mind, here is my list of some problems that need solving:

Problem 1: Unhelpful rhetoric

I’m looking at you Bob Godfrey, Democratic legislator of Danbury, who is just the latest lawmaker to stick his foot in his mouth when it comes to private enterprise in Connecticut. Godfrey likened General Electric’s announcement to a skunk ruining Connecticut’s picnic.

The problem is, for many businesses and residents in our state, our economic climate is no picnic. With a high cost of living, high taxes, and some serious long-term liabilities looming on the horizon, there are many reasons to worry about Connecticut’s fiscal condition.

When Godfrey and others make comments like this, it sounds like our political leaders are unwilling to face the hard realities and hard work that it will take to get Connecticut back on track.

Problem 2: Tax denial-ists

You know how science deniers drive people on the left crazy? That’s how I feel every time I hear someone claim Connecticut’s taxes have nothing to do with GE’s departure.

In the days following GE’s announcement, many top leaders wanted to blame everything but the recent tax hikes for the move. But we know that taxes did play a role in GE’s decision.

How do we know that? Because they said so. Were they thinking about moving before June’s tax hikes were announced? Maybe. But the tax hikes were the catalyst that led to the formation of a search committee, which ultimately led to the decision to move to Massachusetts.

Did the urban factor play a role? Yes, it likely did for GE, and it may for other businesses as well. But that is not true for every business. And instead of focusing on what drew GE to Massachusetts, how about we focus on what happened in Connecticut to push them out – and let that be a lesson on what we can do to keep or attract businesses to move here.

That doesn’t mean we need them to applaud corporate bailouts or sweetheart tax deals. It does mean we need to embrace the important role private sector businesses play in our economy, and stop treating their leaders like they’re the problem.

And it means we need to take a good hard look at what has happened in the 25 years since Connecticut’s income tax was instituted. Since then state spending has skyrocketed, largely unchecked.

Where have 25 years of tax-and-spend policies gotten us? The answer is higher inequality, job growth that has lagged behind national growth, massive amounts of debt, and a monster of a budget with an insatiable appetite for more tax dollars.

It used to be that Connecticut was the low-tax alternative to states like Massachusetts and New York, but now Connecticut’s tax burden is heavier than Massachusetts’ and is catching up to New York’s. In fact, we now have the second highest tax burden in the nation, according to a recent report released by the Tax Foundation.

The solution is to cut spending. It has to be done. State lawmakers need to start with public employee compensation, the cost of which is – by far – growing faster than the rest of the budget.

One of the ways we can get a handle on compensation growth is by following the example of all of our neighboring states by legislating public employee benefits instead of setting them through collective bargaining. This will make these benefits much more transparent, and more responsive to the state’s needs.

Problem 3: Wealthy residents leaving the state

Talk about denialists – despite overwhelming evidence that wealthy people are moving out of Connecticut, pro-tax groups are working overtime to convince us this isn’t the case.

But all you need to do is follow the money. From 2011 to 2013, Connecticut lost 13,000 households to Florida, taking with them an average household income of $228,745. If that number seems insanely high, it is. Likely it is being skewed by a few people with very, very large incomes.

Why are they leaving? Because lawmakers in Hartford seem absolutely determined to suck as much money out of their pockets as possible.

The problem is not for the wealthy, who can afford to pack up and move, but for the rest of us left behind. We have to pay more and more in taxes to make up for the tax revenues we’re losing when the wealthy leave.

In terms of policies to stem the outflow, as a good start lawmakers could eliminate or reform Connecticut’s unified gift and estate tax.

We also circle back to that unhelpful rhetoric. People aren’t going to stay where they don’t feel welcome. That’s true for our wealthy residents, it’s true for Connecticut’s middle class, and it was true for GE.

Suzanne Bates is policy director for the Hartford-based Yankee Institute, Connecticut’s free-market think tank.

What do you think?

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