Connecticut determined to pluck every feather from golden goose

Connecticut_State_Capitol,_Hartford

If one wanted to chart a course for steering a state onto the shoals, look no further than Connecticut.

Twenty-five years ago, the Nutmeg State had no state income tax and served as tax refuge for many New York City workers.

Those days are long gone; last week the Connecticut legislature again raised state income tax rates, with the top marginal rate set to rise to 6.99 percent.

Of course, Gov. Dannel P. Malloy promised during his re-election campaign last year that he wouldn’t raise taxes, but that’s the same thing he said in 2010, a year before he signed a $2.6 billion tax hike.

The thing is, it’s not like Connecticut is growing like gangbusters and can afford to bleed its citizens dry.

According to the Wall Street Journal:

…the state grew a scant 0.9% in 2013, the last year state data are available. That was tied for tenth worst in the U.S. The state’s average compounded annual growth for the last four years is 0.42%. Slow growth means less tax revenue but spending never slows down. Some “40% of the state budget goes to government employee compensation and benefits, including payroll, state pensions, teacher pensions and current and retiree health care,” says Carol Platt Liebau, president of the Hartford-based Yankee Institute. …The Tax Foundation ranks Connecticut as one of the 10 worst states to do business. The state finished last in Gallup’s Job Creation Index in 2014 and now ties with Rhode Island for the worst job creation in the index since 2008.

The Journal added that Connecticut was one of six states that lost population in fiscal 2013-2014, and a Gallup poll in the second half of 2013 found that about half of state residents would migrate if they could.

If all of the above weren’t bad enough, lawmakers also made permanent a 20 percent surtax on Connecticut-based companies’ annual tax liability – a tax on a tax – which would be figured on Connecticut companies’ world-wide income, rather than what they earn in the state, according to the Journal.

Consider some of the corporations headquartered in Connecticut: Aetna, Cigna, General Electric, Pratt & Whitney, Praxair and Xerox.

Why would any of the above stay in Connecticut when faced with this kind of competitive disadvantage?

No doubt economic development officials in low-tax states such as Texas and Florida are giddy with anticipation at getting a shot at landing the likes of a GE or Pratt & Whitney.

“The high marginal rates are bad enough, but it is an astonishing overreach to tax corporations headquartered in your state based on their worldwide income,” according to the Coyote Blog. “This leads to a huge double taxation problem for any company dumb enough to stay.”

(Top: Connecticut Statehouse, Hartford, Conn.)

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4 thoughts on “Connecticut determined to pluck every feather from golden goose

  1. In Ireland the top rate of income tax is 40% (in reality probably slightly higher when extra levies are added in) and most consider that to be on the middle-to-low side for Europe. It probably should be closer to 60%. I presume the state tax is an addition to federal income taxes? Or is it a corporation tax?

    • Indeed. But I’m not sure how many folks in Connecticut would consider themselves adequately represented. Of course, the governor and the vast majority of incumbents were re-elected in the last election, so overall those in Connecticut have no one to blame but themselves.

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