November 24, 2015

Why Connecticut’s Business Climate is About More than Corporate Taxation

Sharon Langer, MEd, J.D.

A basic line learned by every first year law student is that “bad facts make for bad law.” This maxim holds true in the legislature as well as in the courts. Take the oft repeated claim that Connecticut should give big business tax breaks to remedy an allegedly “bad business environment.” Before those claims drive any legal changes, let’s look at the underlying data: data which simply does not support the complaints of special interests. 

Fact #1: Most Connecticut businesses reported a net profit last year. The percentage of Connecticut businesses that record net profits has increased in recent years, and is higher today than at any point since 2008.

Fact #2: Business in Connecticut benefits from a highly educated workforce. Nearly 37% of Connecticut residents age 25 and older hold at least a Bachelor’s degree, compared with a national average of less than 29%. Visualizations of the most recent US Census data show that the proportion of state residents with degrees in higher education has more than doubled since 1970.

Fact #3: Business in Connecticut benefits from a highly innovative workforce. Bloomberg Rankings ranks Connecticut fourth in business innovation, noting that STEM professionals comprise 2.72% of the state’s population with another 10.2% holding science and technical degrees.

Fact #4: Business in Connecticut benefits from a high rate of insurance coverage and a healthy population. Health matters to business. According to the Centers for Disease Control, “indirect costs of poor health including absenteeism, disability, or reduced work output may be several times higher than direct medical costs.” More than 93% of state residents carry health insurance in Connecticut. The oft-cited Measure of America 2013-2014 awards Connecticut first place on its American Human Development Index, with a life expectancy at birth topping 80.8 years. 

Fact #5: Connecticut has yet to fully recover from the Great Recession, with its rate of recovery slowed by long term changes in the state industrial base. 

While Connecticut has yet to recover fully from the Great Recession, its challenges have more to do with long term changes in the economy and with the aging of the state population than with tax policies.  Indeed, the conflicting measures of business taxation cited by detractors reach widely divergent conclusions, ranging from the Council on State Taxation’s index comparing state taxes to productivity, which ranks Connecticut second best in the nation, to the Laffer-American Legislative Exchange Council’s Economic Competitiveness Index which ranks Connecticut forty-seventh.

Business climate does, of course, matter.  We need a healthy economy to assure gainful employment and economically secure families. But business climate is about more than taxes. A healthy business climate requires good transportation and a highly educated workforce: both of which depend upon strategic planning and public investment.  For our state to thrive, we need to support a state budget that invests in human capital and regional infrastructure: a budget that builds toward a shared prosperity and sustainable growth rather than growing wealth disparity and intergenerational poverty.

Issue Areas:
Budget and Tax, Family Economic Security