By CHRIS POWELL
Maybe other big employers in Connecticut will get an idea from the state
Economic and Community Development Department's latest excursion into corporate
welfare.
Last March ClearEdge Power Corp., owner of the former United Technologies Corp.
fuel-cell factory in South Windsor, laid off more than 100 employees. But this
week state government loaned the company $1.4 million at a deeply discounted
rate, with about half the loan to be forgiven if the company adds 80 employees
over three years. Rehiring employees laid off in March will count toward the
total of new employees to be added to achieve loan forgiveness.
So in Connecticut you now can lay off your workers and then get money from state
government for hiring them back.
The economic development commissioner, Catherine Smith, explains this as a plan
to induce ClearEdge to expand in Connecticut rather than at its facilities in
Oregon and California. But the plan will work only at the expense of inviting
more big employers to blackmail state government -- not just by threatening to
move but also by laying off employees and then demanding that state government
ransom them.
While the Democratic Party still poses as the party of working people, the
“economic development” policy of Connecticut's Democratic administration takes
from the poor to give to the rich. Big employers have blackmail power; small
employers don't. So small employers and their employees pay more in state taxes
to subsidize bigger companies and their employees.
Yes, many states are subsidizing big employers this way and inducing subsidy
competitions with other states. But since subsidies to big business come at the
expense of small business, both in taxes and general competitive disadvantage,
the best economic development policy still is a tax and regulation regime that
is favorable to all businesses without regard to size.
Connecticut's unattractiveness to business and residents alike did not arise
from a lack of subsidies to particular businesses but rather from the failure of
government generally to provide value even as it has
grown and become more expensive.
That is, education policy has not been producing more or better education but
mainly has just been enriching educators. Welfare policy has not reduced poverty
and enabled and required people to start supporting themselves but rather has
worsened dependence and anti-social behavior. Connecticut's government employee
policies practically forbid ordinary public administration. And so forth.
Connecticut's big problem is that the premises of some of its major policies are
mistaken or, really, mere pretexts for parasitism.
* * *
According to a recent study by the state Office of Policy and Management, as
reported by the Waterbury Republican-American, revenue foregone by state tax
exemptions totals nearly half of state government's tax revenue -- $7 billion in
tax breaks against $15.3 billion in receipts.
While some broad exemptions may be sensible and command wide support, like the
exemption of food from the sales tax, many exemptions are obscure and the
product of special pleading or pandering, like the celebrated exemption for
clothing and footwear. Legislators propose dozens of such tax breaks every year
and some become law, like the one enacted last year to give tax credits for
restoring historic houses.
Apart from basic decency, which explains the food exemption, there may be only
one justification for tax exemptions: efficiency, as when application of a
general tax to a specific transaction will forfeit more money than it raises, by
driving business out of state. By that standard state government probably could
raise billions of dollars or finance billions in general tax reduction by
repealing many less compelling tax exemptions.
But it has been many years since Connecticut has been able to appropriate that
much political courage.
Chris Powell is managing editor of the Journal Inquirer in Manchester, Conn.
