To the editor:
It is hard to say what caused more of a celebration this week in Boston: the Patriot’s win in the NFL divisional round or the acquisition of General Electric as a new Massachusetts business entity.
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Of course, neither win came cheap, with the Boston Globe estimating that for GE Boston will chip in $20 million in property tax relief and the state $120 million in tax incentives. Clearly, Connecticut was in no financial condition to match such a large offer; the state is locked down in financial crisis mode.
The winning bidder’s tax incentives are proof that Senate President Martin M. Looney assertion that “it is clear that GE’s decision has nothing to do with taxes” does not wash. Senate Majority Leader Bob Duff said “G.E. will still have thousands of employees in Connecticut.”
It is no surprise that Martin Looney and Bob Duff reacted so defensively. It was the Connecticut legislature’s business tax incentive last year that got the ball rolling at GE. In order to pacify GE and other businesses that had “looked at the impact and gulped” (in the words of the Commissioner of Revenue Services), the plan was later amended, but by then it was too late: GE had already set up the relocation study that started the process which ended in last week’s announcement.
General Electric’s CEO Jeff Immelt’s explanation that it was the “better ecosystem” that informed General Electric’s decision sounds evasive. In any event, the liberal ideology and antibusiness attitudes demonstrated in last year’s tax package surely clash with the “ecosystem” of a global business like GE.
The company thinks and acts based on long-term strategies while short term fixes define the Connecticut legislature. Surely Jeff Immelt is aware that the increase in capital gains and business taxes that was withdrawn under pressure last year may come back on the table if the state budget deteriorates. And this is exactly what is happening.
On Friday, Jan. 15, the governor’s budget office released new data showing state income tax receipts short of assumptions, including those made at the time of the cut-backs in December.
Even the Republican opposition which was left out of the process in December could not have expected that the plan would fall apart within a month. “We are most likely worse off now than we were a month ago when we ‘theoretically’ cut $350 million from the budget,” House Minority Leader Themis Klarides, R-Derby, said last Friday.
Further down-side revisions to tax receipts are inevitable in coming months. The state relies significantly on capital gains taxes and these will not come in a year where the stock market is in trouble.
Last year, a fall in the equity indices by 6.4 percent caused $86.4 million of losses in revenues, according to the State Comptroller; this situation will be worse this year. Incidentally, capital gains taxes do not only alienate businesses, they also alienate management.
This may have been a substantial factor in GE’s management’s decision, even if the company kept quiet on this issue.
The Darien Patch reported last week that Darien residents have the highest average credit score in the state (739). The people in Darien work hard to keep family
financials sound. The same holds true for the Darien town government where sound financials are always front and center. This contrasts with the fiscal management performance at the state level — which, to use the language of mortgage loans, appears to score between subprime and bank-owned.
There is not only a stark contrast of “ecosystems” between the Hartford administration and GE — there is also a large cultural gap between the “ecosystems” of the government and that of its people, especially for hard working families in Darien who manage their finances well.
With the departure of its largest taxpayer and employer, Fairfield residents will see their home prices negatively affected and their property taxes go up.
But they are not alone in this; Darien residents will be affected too. With the business tax base in Hartford eroding, Dan Malloy and Bob Duff can be trusted — to find a way to put their hands in your pocket.
Bert von Stuelpnagel
Darien RTC Treasurer