July 18, 2017 - Douglas Myser
Connecticut's taxes. Per Capita income, Connecticut's taxes is a mess. It's pensions are woefully under funded. It's deficit is projected to surpass $2 billion, or 12% of its total annual revenue. Hartford is approaching bankruptcy. Conservatives look at Connecticut and see a liberal dystopia, where high taxes have ruined the economy. Liberals, on the other hand, see a capitalist horror show, where the rich dwell in gilded mansions, ensconced in sylvan cul-de-sac, while nearby towns face rising poverty and bankruptcy. Why is America's richest state floundering ? Connecticut's taxes.
The first answer is: Corporations are leaving because of Connecticut's taxes. Aetna, the insurance giant, is leaving Hartford, where it was founded 150 years ago. In early 2016, General Electric announced that it would move its global headquarters from Fairfield, Connecticut, to Boston. Caterpillar, Motorola, and Kraft-Heinz have all moved offices or employees out of the state, as well. The second answer is: People are leaving because of Connecticut's taxes. It's rare for any state to actually shrink, but Connecticut's population has been falling for three straight years. Meanwhile, only Michigan, Ohio, and Mississippi had slower job growth than Connecticut did over the last two decades, according to Jed Kolko, the chief economist at Indeed, a job site.
For Conservatives, the culprit is just as simple: It's big government run amook. The Wall Street Journal's editorial board holds up Connecticut as a poster child of the costs of high taxes. "Connecticut's progressive tax experiment has hit a wall," they wrote in April. Conservatives argue that Connecticut's income, property, and sales taxes have reached an altitude that cannot support economic life. But Connecticut's taxes and budget shortfall isn't just about tax rates. It's about who is paying the taxes. The richest 0.02 percent of Connecticut households make more money than the bottom 48 percent, according to state reports. This 0.02 percent cluster along the Gold Coast and tends to work in finance.
In the last decade, Connecticut's millionaire's have accounted for as much as 30 percent of the state's income tax-revenue. This is a problem, because the investment income of financiers is volatile. When hedge funds earnings falter, as they have in the last few years, Connecticut's taxes feel the pain.
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