The Connecticut Office of Policy and Management is searching for a vendor who could analyze and model a complicated new taxation strategy that would replace part of the income tax with a payroll tax. If implemented, the new tax structure could result in employees seeing a pay reduction of 5 ...
Naughty list part 3: Connecticut businesses deserve more than coal
This time of year, children are told that Santa Claus is making a list and checking it twice to find out who has been naughty or nice. However, Santa isn’t the only one who makes a list every year. Leading experts and organizations across the country also rank states by their public policy. In this ongoing series, we will see which “naughty” lists Connecticut landed on and make small suggestions to help the state be a little “nicer.” Check back every day from now until Christmas for a new entry!
There is no shortage of naughty lists on which Connecticut can be found. The state is falling behind on startup activity and, unfortunately, also ranks as one of the most poorly run in the country generally.
Among the most high-profile annual state rankings is CNBC’s “scorecard on economic climate,” America’s Top States for Business. This list, which measures a sizeable number of factors, pegs Connecticut as the 43rd best state for business, a 10-place drop from 2015. Given Connecticut’s economy and the anti-business policies that inspire this kind of analysis and ranking, businesses’ wariness is understandable.
According to CNBC, Connecticut scored 40 or lower for its cost of doing business, overall economy, infrastructure, and cost of living. These are critical factors that impact not only a company’s bottom line, but its workers’ wallets, too. The state placed 25 or lower in seven of 10 categories and no higher than 18 in any. The study takes special note of Connecticut’s slow growth, relatively high unemployment, and high tax rates.
In short, Connecticut doesn’t currently look like a nice place for business.
When businesses lack confidence in a state, it most keenly hurts the people who are looking for work. If a business cannot rely on a state to be stable and friendly, it is less likely to reinvest in itself and more likely to discontinue or shrink operations. In some cases, businesses may even conclude that relocation is the best option for their workers, shareholders, and customers.
In its 2016 Survey of Connecticut Businesses, BlumShapiro and the Connecticut Business and Industry Association uncovered some interesting sentiments about the state. The responses align well with CNBC’s findings.
The good news: fewer business owners say they are cutting jobs than in 2015; 52 percent of companies introduced a new service or product; and only 26 percent are considering moving or shifting significant production to another state within the next five years.
The bad news: 26 percent of companies are considering moving or shifting significant production to another state within the next five years! In a truly healthy economy, nearly one quarter of businesses should not be considering moving in the short-term.
Additionally, 87 percent of respondents said economic development officials where they do business outside the state are welcoming and helpful. While only 47 percent plan to continue making “job-creating investments in Connecticut.” On the subject of public policy, factors said to hamper their growth included cost of business (79 percent), taxes (74 percent), unpredictability of legislative decision making (71 percent), and cost of living (69 percent). Those are nearly identical to the areas Connecticut struggles according to CNBC’s research.
One interesting note, however, relates to infrastructure. While 69 percent of respondents said the state’s infrastructure is out of date, only 20 percent said it was hampering their ability to grow. This apparent disconnect seems to undercut the idea that the best path to job creation is through expensive public works projects.
(While Connecticut’s CNBC results put them on the naughty list, a state like North Carolina is firmly planted on the nice list thanks to good public policy. Unlike Connecticut, North Carolina’s rank improved four places from 2015, and the state only ranks lower than 25 in three categories. North Carolina’s growth is significantly higher; its unemployment and tax rates are both lower.
In both states, businesses’ confidence directly reflects the climate in which they operate. In its Economic Outlook survey for fall 2016, PNC found North Carolina businesses to be hopeful and willing to reinvest in the state. 77 percent felt optimistic about their economy, and 89 percent felt optimistic about their company’s prospects.)
Nice states encourage and reward risk takers, both with policy and general attentiveness to their job creators. Unpredictability, projections to increase taxes, and constant regulatory creep are factors that reduce business confidence and, ultimately, reinvestment in a state. Naughty states disregard the concerns of employers.
There are a myriad of policy solutions that can help get business on the right track, but the easiest and simplest way to re-establish trust between policymakers and job creators might be as little as a tonal shift. Instead of threatening tax increases or punitive action, acknowledgment that pro-growth strategies benefit everyone in the state might go further than expected.
To his credit, Governor Dannel Malloy did, if indirectly and discreetly, start doing these things this past year. His state of the state address did not demand tax increases, and he made public comments suggesting that economic growth is the key to generating revenue and improving the lives of workers in the state. That newfound niceness, if extended, would be a welcome change in a state where businesses too often feel like they’re the naughty ones.
**Meghan Portfolio contributed to this article** Amanda Roos never got to open her brand-new Painted Goddess Salon in Monroe. Her new beauty and hairdressing business was ready to open its doors on March 20, the same day Gov. Ned Lamont announced a shutdown of non-essential businesses, including hair and nail ...