This might be more painful than actually stepping on a LEGO.
The LEGO Group announced on Jan. 24 it will be shipping its U.S.-based headquarters to Boston by the end of 2026, moving from its current office in Enfield, Conn., where the toy giant has called home since 1975.
“Boston is ranked one of the best cities in the world to attract and retain talent,” said Skip Kodak, president of the LEGO Group in the Americas. “This, along with its world-class academic institutions, skilled workforce and great quality of life makes it an ideal location for our U.S. head office.”
Currently, nearly 740 people work in the Enfield office.
Yet, according to the Tax Foundation, Connecticut ranks 15th (1st being the worst) highest combined federal and state corporate tax rates, while neighboring states such as New York, Massachusetts and Rhode Island rank 18th, 12th, and 20th, respectively. This begs the question: with relatively similar rates, why is LEGO relocating to a state with higher tax rates?
(Meanwhile, the legislature recently proposed increasing the corporate business tax rate from 7.5 to 11.5 percent)
Coincidentally, this news follows the latest Connecticut jobs report which showed the state’s private sector has yet to recover the losses from the pandemic — and added relatively few new private jobs since September.
Regardless, the decision is another devastating, yet all too familiar, story in corporate headquarters fleeing the Constitution State. Here are a few others in recent years:
General Electric — the company founded by Thomas Edison, J.P. Morgan and Charles Coffin and one of the original 12 companies listed on the Dow Jones Industrial Average — once called Fairfield, Conn., home. However, after more than four decades, GE chose to relocate to Boston to “be at the center of an ecosystem that shares our aspirations,” according to then-CEO Jeff Immelt. The move came after the company announced its displeasure with legislative tax policies.
After 164 years in Hartford, the city where the insurance giant was founded, Aetna decided to move its headquarters to New York City in 2017. The company stood to receive $24 million in tax breaks from New York state, and invested $89 million to transform 145,000 square feet building on Ninth Avenue. Besides the tax incentives, which Connecticut reportedly matched, Aetna’s chairman and chief executive — Mark T. Bertolini — stated the Big Apple was more conducive to meeting the company’s aspirations of creating digital tools, flocking to a city that would attract talent. As he bluntly put it, “It’s very hard to recruit people like that to Hartford.”
In 2018, Edible Arrangements — a company specializing in fresh fruit bouquets — moved its headquarters from Wallingford to Sandy Springs, Ga., in greater Atlanta. Former CEO Mike Rotondo stated at the time the company would “always have a presence” in Connecticut since the state is part of the “brand’s history and heritage.” However, Atlanta was an “attractive location” to “support the company’s next phase of growth.”
After announcing a merger with Raytheon Co., based in Waltham, Mass., the formerly Farmington-based United Technologies Corp., moved its headquarters to Boston after nine decades in Connecticut. At the time, nearly 19,000 employees remained in the state, while nearly 100 executives and other workers shifted to Massachusetts.
On Nov. 18, 2019, Stag Arms — a gun manufacturer — announced its decision to move its headquarters from New Britain to Cheyenne, Wyo. The company decided it “was time to do a complete refresh,” in order to pursue “visionary customer-centric leadership, a business-friendly, pro-growth economic environment, and a cultural climate that reflects Stag’s brand image of independence and free spiritedness.” Additionally, the company saw Wyoming as a “firearm-friendly and outdoor-oriented” environment focused on attracting “high skilled/high-paying manufacturing jobs.”
Alexion Pharmaceuticals was founded in New Haven in 1992, operating in the Nutmeg State for 25 years. Then, in 2017, the company announced it would move to Boston “despite $26 million in economic development aid from Connecticut meant to jump-start the state’s biotechnology sector.” CEO Ludwig Hantson explained the departure to be in “an ecosystem where biotech is front and center,” adding, “Needless to say, we will have a larger talent pool of people who have biotech experience” in the Boston-metro area.
Though Connecticut is still home to 14 Fortune 500 companies, hopefully lawmakers will realize that the state has more work to do to create a competitive business climate. Our Charter for Change is a good place to start.