GE Flees Connecticut for the Tax Haven of Massachusetts

General Cornwallis surrendered the British Army to General Washington at Yorktown in 1781. The British band played “The World Turned Upside Down.” That was my reaction Tuesday when the news emerged that General Electric is leaving the once upon a time tax haven of Connecticut for the infamous Taxachusetts. Massachusetts is attractive to new business. Who wudda thunk Massachusetts would be more attractive to business than Maine, Rhode Island, Connecticut, Vermont, and New York? The world is truly turning upside down. New York companies fled to Greenwich and Stamford to escape the high taxes, high cost of living, excessive regulation, and the other hassles of commuting into Manhattan. GE moved to Fairfield, Connecticut 42 years ago. Connecticut was welcoming with open space and no income tax. Massachusetts was developing a reputation, even before Governor Michael Dukakis, as Taxachusetts. The industrial backbone of Massachusetts, such as shoe and textile manufacturing, fled to the South or overseas. Entrepreneurs left. Massachusetts became a solid blue state. It was the only state that George McGovern carried in 1972. Republicans remain an endangered species in the Massachusetts Legislature. Connecticut voters defeated the flaky, liberal Republican Senator Lowell Weicker for reelection in 1988. Yet he made a miraculous return to politics two years later, winning election as Governor of Connecticut as an independent. He campaigned against enacting a broad based income tax. He won the election: Connecticut lost. He quickly changed his mind after the election and jammed a broad based income tax of 4% through the legislature. Connecticut began its decline in population, economic growth, and employment while the public sector, fed by the income tax, inflicted ballooning deferred pension costs on the state. Democratic Governor Donnel Malloy, in thrall to the public employee unions, pushed through (shades of Lowell Weicker) substantial income tax increases in 2011 and 2015. Connecticut’s top tax rates for individuals are 6.99% and 9% for corporations. The tax increases have not solved the state’s budget problems since the Governor and legislature will not cut the budget, similar to the problems in Illinois. The Governor basked in the sunlight Tuesday night as he sat in Michelle Obama’s box at the State of the Union Address. Governor Malloy is the Obama’s favorite governor as he emulates the Obama agenda at the state level. GE warned the state political leaders last year that the company would leave the state if they persisted in their anti-business crusade. The response was skepticism coupled with charges of greedy corporations. They said GE was bluffing. GE knew when it wasn’t wanted. Capital is mobile. So is business. Utilities, hospitals, and universities lack mobility, but companies can move, both from states and overseas. Hartford, the State Capitol, has witnessed the loss of substantial insurance industry jobs in recent decades. GE responded to roughly $145 million in subsidies and benefits from Boston and Massachusetts to move its corporate headquarters and 800 employees to Boston. 200 of the workers are corporate staff, and 600 digital industrial product managers, designers, and developers. The loss of the 200 corporate staffers is most significant because top corporate leaders become major players through personal involvement and contributions in the cultural life of a city and state as well as supporters of the state’s institutions of higher education and museums. Governor Malloy’s less than brilliant response: “We win some. We lose some. This one hurts.” It’s not “We;” it’s the people of Connecticut who lose. The sun is no longer glowing on Governor Malloy. (By was of disclosure, I own shares of GE in my IRA)