In his article on Connecticut at Atlantic Derek Thompson lurches uncontrollably into the observations I made about Connecticut’s budget problems several days ago—its tax base is declining:
Despite being the richest state in the country, by per-capita income, Connecticut’s budget is a mess. Its pensions are woefully under-funded. Its deficit is projected to surpass $2 billion, or 12 percent of its total annual tax 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 culs-de-sac, while nearby towns face rising poverty and bankruptcy. Why is America’s richest state floundering?
The first answer is: Corporations are leaving. 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.*
The second answer is: People are leaving. 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.
What I think goes unappreciated in these commentaries about Connecticut is that state’s split personality. Southwestern Connecticut is a sort of bedroom community for wealthy New Yorkers. The rest of the state (especially when you discount New Haven) is very different indeed and it’s that part of the state that is suffering.
The wealthy are much more mobile than the poor and do, indeed, respond to incentives. If you tell them you don’t want them, by raising their taxes for example, they’re polite enough to leave.
And one of the big implications of really great income inequality is that a very few very rich people leaving can make a huge difference in a state’s revenues. It’s like what happens to a company town when the company leaves.
Indeed, remember when Alabama was able to make payroll only because a rich man’s estate taxes came in. However, no doubt plans are being made to make the Nutmeg state livable by tax subsidies for the arts and new venues for professional lacrosse and arena football.
That’s absolutely correct, Dave. I lived in New Canaan and Ridgefield (Fairfield Cty). Quite different than Norwalk, and worlds apart from the rest of the state. Shuttered brass mills, shipyards, widget makers of all types etc. Really no different than any industrial area of IL, IN, MI, OH, WI…….
Same old shit. And think about it, Kieth Richards moved to Weston to escape English taxes.