A Connecticut Tax Story

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RxCowboy

Has no Rx for his orange obsession.
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From wsj editorial page:

A Connecticut Tax Story
A rate increase yielded less revenue than the state paid in subsidies.
By The Editorial Board
June 18, 2019 7:09 pm ET

The United Technology headquarters in Farmington, Conn., June 10. PHOTO: PAT EATON-ROBB/ASSOCIATED PRESS
United Technologies last week announced plans as part of its merger with Raytheon to relocate its headquarters to Boston from Farmington, Connecticut. CEO Greg Hayes says the move isn’t motivated by taxes. But as a new study documents, more businesses are leaving Connecticut as they get walloped with higher taxes that are bleeding the state.

Democrats in 2015 imposed a 20% surtax on top of the state’s 7.5% corporate rate, effectively raising the tax rate to 9%. They also increased the top income tax rate to 6.99% from 6.7% on individuals earning more than $500,000. The state estimated the corporate tax hike would raise $481 million over two years, but revenue increased by merely $323 million—$161 million a year—according to a new Yankee Institute report.

Meantime, the state’s Department of Economic and Community Development, whose job is to strengthen “Connecticut’s competitive position,” in 2016 alone spent $358 million (mostly on direct payments and loans) to induce businesses to stay or move to the state. This means that Connecticut doled out twice as much in corporate welfare as it raked in from the corporate tax increase.

As the Yankee Institute notes, the business handouts cost even more than that since the state tapped bond funds to pay for them. Thus we have Connecticut’s business model: Raise costs for everyone and then leverage taxpayers to provide discounts for a politically favored few. A business that operated like this would lose customers and eventually go bankrupt.

That may be where Connecticut is headed. The state has lost population for the last five years. In 2016 GE announced it would move its longtime headquarters from Fairfield to Boston. Hallmark, RBS, Bristol-Myers Squibb , Boehringer Ingelheim Pharmaceuticals and Rogers Corp. have also announced job cuts or moves. Alexion Pharmaceuticals , which received $26 million from the state, checked out of New Haven in 2017.

The exodus has depressed tax revenue. While United Technologies will continue making jet engines in Connecticut, at least for now, 100 high-paying corporate jobs will move to Boston. Massachusetts has a flat 5.1% income tax.

By the way, Democrats in New Jersey who raised the corporate rate last year to 11.5% from 9% are now negotiating an extension of business tax breaks to prevent companies from bolting. A state task force last month found that some businesses made phony exit threats to obtain tax credits. The tragedy is that if New Jersey and Connecticut didn’t have such hostile business environments, they wouldn’t have to offer tax bribes to business.

Appeared in the June 19, 2019, print edition.
 

sc5mu93

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I relocated out of CT about a year ago. That state is a financial mess. It's going to get worse before it gets better. It says a lot about your state when businesses are moving to "Taxachusettes" to avoid your taxes.
 

CocoCincinnati

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Basic liberal tax policy in a nutshell. Raise taxes to virtue signal but keep the power to pick and choose who pays that much...easier to reward their cronies or businesses they agree with. It's about power, not revenue or the "wealth" gap.
 

sc5mu93

WeaselMonkey
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Well, eventually CT government will have no one to reward and no one to extract taxes.

I had a pretty good paying job, and could not afford to purchase a home there. I could barely afford to rent outside of Bridgeport (which is one of the POOREST) areas in CT.

When I lived there, Gov. Dannell Malloy was pushing to install tolls on all major roads to take advantage of dirty "out of staters" not paying for the maintenance of CT roads that they were using when driving from NYC to Boston. There was major push back because the tolls were pretty much a tax on low income working class. (not to mention the tolls were to subsidize the CT obligations under MTA - train service). Revenue from gas taxes enacted to pay for roads was not as high as expected because they were giving people tax credits to buy hybrids and electric cars which didn't need or needed less gas. Go figure. Lots of public displays of disapproval regarding institution tolls. So it died.

Fast forward, to election and Ned Lamont (D) was advocating for tolling ONLY tractor trailers. After election, ol' Ned said that idea was unworkable, so back to installing tolls on everyone. Promises of discounts for CT drivers are being used to placate upset CT residents - yet the discounts do not get down to zero. so it is still a tax on everyone, particularly the low income. They have been hiding the exact details of the plan from the public because it will be a S*&T storm.

Seriously, there will be no one left if they keep going this way. The unfunded pension liabilities are ridiculous, and no one will address them. just kicking the can. Most of the pensioners don't even live in the state anymore. Its comical now that I don't live there.
 

Boomer.....

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What don't these Dems understand? Increasing the tax rate on the rich and corporations does not solve income problems or work out well in the end.
 

sc5mu93

WeaselMonkey
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What don't these Dems understand? Increasing the tax rate on the rich and corporations does not solve income problems or work out well in the end.
at a state level, yeah it doesn't work, because people can vote with their feet and move to a better situation. At a national level, if they do the same, its a LOT harder for people to vote with their feet, and find a better situation.

The states were always supposed to be the "laboratories" of political idea. Many politicians don't pay attention to the results of the experiments.
 
Feb 6, 2007
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From wsj editorial page:

A Connecticut Tax Story
A rate increase yielded less revenue than the state paid in subsidies.
By The Editorial Board
June 18, 2019 7:09 pm ET

The United Technology headquarters in Farmington, Conn., June 10. PHOTO: PAT EATON-ROBB/ASSOCIATED PRESS
United Technologies last week announced plans as part of its merger with Raytheon to relocate its headquarters to Boston from Farmington, Connecticut. CEO Greg Hayes says the move isn’t motivated by taxes. But as a new study documents, more businesses are leaving Connecticut as they get walloped with higher taxes that are bleeding the state.

Democrats in 2015 imposed a 20% surtax on top of the state’s 7.5% corporate rate, effectively raising the tax rate to 9%. They also increased the top income tax rate to 6.99% from 6.7% on individuals earning more than $500,000. The state estimated the corporate tax hike would raise $481 million over two years, but revenue increased by merely $323 million—$161 million a year—according to a new Yankee Institute report.

Meantime, the state’s Department of Economic and Community Development, whose job is to strengthen “Connecticut’s competitive position,” in 2016 alone spent $358 million (mostly on direct payments and loans) to induce businesses to stay or move to the state. This means that Connecticut doled out twice as much in corporate welfare as it raked in from the corporate tax increase.

As the Yankee Institute notes, the business handouts cost even more than that since the state tapped bond funds to pay for them. Thus we have Connecticut’s business model: Raise costs for everyone and then leverage taxpayers to provide discounts for a politically favored few. A business that operated like this would lose customers and eventually go bankrupt.

That may be where Connecticut is headed. The state has lost population for the last five years. In 2016 GE announced it would move its longtime headquarters from Fairfield to Boston. Hallmark, RBS, Bristol-Myers Squibb , Boehringer Ingelheim Pharmaceuticals and Rogers Corp. have also announced job cuts or moves. Alexion Pharmaceuticals , which received $26 million from the state, checked out of New Haven in 2017.

The exodus has depressed tax revenue. While United Technologies will continue making jet engines in Connecticut, at least for now, 100 high-paying corporate jobs will move to Boston. Massachusetts has a flat 5.1% income tax.

By the way, Democrats in New Jersey who raised the corporate rate last year to 11.5% from 9% are now negotiating an extension of business tax breaks to prevent companies from bolting. A state task force last month found that some businesses made phony exit threats to obtain tax credits. The tragedy is that if New Jersey and Connecticut didn’t have such hostile business environments, they wouldn’t have to offer tax bribes to business.

Appeared in the June 19, 2019, print edition.
You can't starve a profit into a cow, and you can't tax yourself into prosperity.