The editors of the Wall Street Journal are eager to point out that income growth in Connecticut is slow:
The 50 American states have long competed for people and business, and the 2017 tax reform raises the stakes by limiting the state and local tax deduction on federal returns. The results of bad policy will be harder to disguise.
A case in point is Connecticut’s continuing economic decline, and now we have even more statistical evidence as a warning to other states. The federal Bureau of Economic Analysis recently rolled out its annual report on personal income growth in the 50 states, and for 2017 the Nutmeg State came in a miserable 44th.
The progressive paragon’s performance is even worse when you look at the details. The nearby chart shows that the state’s personal income grew at the slowest pace among all New England states, and not by a little. Governor Dannel Malloy’s eight-year experiment in public-union governance saw income grow by a meager 1.5% for the year, well below Vermont (2.1%). The state even trailed Maine (2.7%) and Rhode Island (2.4%), which are usually the New England laggards.
and they attribute the very slow growth to bad state government policies.
Maybe. But they really should provide some context. Connecticut’s median household income is $71,346—one of the highest in the nation. Rhode Island’s and Maine’s median household incomes are a third lower. If you’ve ever been to Connecticut, you’ll understand the reason why. The southern part of Connecticut is essentially a bedroom community for New York City, full of rich New Yorkers. A financial sector in which incomes aren’t rising as fast as during the boom period will mean that median household income in Connecticut will grow slowly, too.
To fill out the picture a bit, New Haven has areas that are urban slum while upstate Connecticut is largely rural, dotted with light manufacturing or, at least, it used to be before much of that sort of manufacturing moved to China. Then there’s Hartford which used to be a much greater insurance hub than it is now. A lot of that business has moved south.
My point is that, while taxing income tends to produce less of it, in Connecticut that doesn’t present the whole picture and in the Nutmeg State slow income growth isn’t as bad as it may sound and certainly isn’t as damaging as in Maine. It’s the difference between a Mercedes and an Audi, (or, in some cases, the difference between a Ferrari and a Porsche) not the difference between paying the rent or not.
