Connecticut’s competitiveness in the regional “market” is at the center of the debate over tax policy. And to Malloy’s critics on the left, everything changed on January 13. That was the day that General Electric stunned the state by announcing that it would move its headquarters from Fairfield to Boston, carrying out a threat over the state’s embrace of higher taxes. While the net job loss to Connecticut might amount to only 100 to 200, the psychological impact of losing such a corporate titan was far greater, and liberal leaders point to the announcement as a turning point in Malloy’s economic approach. Three weeks later, the governor laid out his new fiscal vision in his annual State of the State speech, telling legislators that Connecticut “must reset our expectations of what we can afford, how we provide services, and how we save for our priorities.”
There was no talk of further tax increases, only of the need to overhaul the budget, “prioritize funding for core services,” and reflect that “new economic reality.”
In addition to G.E.’s announcement, Aetna and Stanley Black & Decker had also threatened to move jobs out of Connecticut. And to leaders like Hochadel and Sal Luciano of the state’s AFSCME local, Malloy had simply caved. By April, the state had begun laying off hundreds of public employees, often without notice. “It’s also a routine that’s played out in many states, where corporations threaten to leave and scare the hell out of elected officials,” Luciano said. “It’s not like General Electric went to Mississippi or Texas or South Carolina. They went to a higher-tax state.”
The state’s business community argued that the risk of an exodus was real, both by companies and affluent residents who contribute a disproportionate share of the state’s tax revenue. “We do have a great quality of life, but the reality is that other states have been catching up,” said Joe Brennan, president of the Connecticut Business and Industry Association. “Our competitive advantages aren’t as strongly an advantage as they used to be. So I think if you get too progressive from an economic standpoint, you’re going to pay the price. And I think that’s what started to happen the last couple of years in Connecticut.” Brennan said the combination of the economic policies Malloy had pursued—a higher minimum wage, paid sick leave, and the tax increases—was already hurting the state’s business climate. “This was not just some ruse to go to Boston,” Brennan said. “This was serious stuff.”
Media outlets in Connecticut last week jumped on news that Malloy’s Republican predecessor, Jodi Rell, was switching her residency to Florida fanned the exodus fears even further. But to people like Farrell of the Working Families Party, the idea that financiers living in Stamford or Greenwich and whose jobs are tied to Wall Street would suddenly flee isn’t much different than liberals who threaten to move to Canada if Donald Trump becomes president. Even after the tax increases under Malloy, high-earners still pay a higher rate in New York and Massachusetts. And there are other reasons a 69-year-old retiree might move to Florida besides the lack of a state income tax. “They also don’t have winter,” Farrell observed.