Companies' Threats to Leave Connecticut Stall State Budget

With General Electric and Aetna releasing statements Monday that their respective companies would consider looking elsewhere for their corporate headquarters, top Democrats members of Governor Dannel Malloy's staff scrambled Tuesday to rework the proposed two year spending plan.

The statements came in response to proposed tax hikes that would charge higher rates for data processing, reporting and taxing the location of headquarters, and even for some internet downloads. House and Senate Democratic leadership announced the framework of the budget over the weekend and had intended to approve it today.

However, the threats from corporate giants GE and Aetna led to a slamming of the brakes by negotiators after the budget never made it to the House floor Monday night, just two days before the end of the legislative session.

“They were serious in what they said yesterday" said Joe Brennan, the President of the Connecticut Business and Industry Association. "You don’t get statements like that out of the highest level of these global corporations, these idle threats. They’re really really concerned about the direction of the state of Connecticut and they just want to underscore their seriousness.”

A spokesman for Aetna declined an interview request to elaborate further on the possibility of leaving the state. Travelers Insurance also released a statement expressing frustration with the proposals moments after Aetna and GE, but stopped short of threatening to leave citing concerns from employees who live and work in Connecticut.

GE has come under fire in recent years for its tax-paying record. According to the New York Times, in 2010 the company made $14.2 billion and even claimed a tax benefit of more than $3 billion. GE, one of America's largest companies with nearly 6,000 employees in Connecticut, didn't pay any taxes in the United States in 2010 according to the report.

Business professor Daniel Cadden with Quinnipiac University says the threats from Aetna and GE are real.

“GE and Aetna have complained about this because it’s going to affect the tax on corporate headquarters and there additional taxes on higher income individuals and many of the people who make the decisions on whether a company stays or leaves are high income individuals" Cadden said.

He points out that Connecticut lawmakers are also mulling a proposed tax hike on individuals with more than $500,000 in income and families with incomes of more than $1,000,000 which will also lead to decisions from executives.

Republicans in the legislature who have been shut out from negotiations piled on the budget mess, criticizing Democrats for crafting the budget in secret.

“You know four years ago we had this very same debate in front of us" said Sen. Rob Kane, (R - Watertown), the Ranking Republican on the Appropriations Committee. "We ended up in a deficit. Here we are again: more taxes, more deficits, and it just doesn’t work.”

Democrats in the Connecticut House are responsible for the hold up as well, at least in part. A faction of them are holding back support with concerns over property tax changes that they say will adversely affect middle-income families.

The budget agreement included a reduction to the homeowner property tax deduction from $300 to $200, as well as property tax relief from the car tax by instituting a statewide cap for all cities and towns.

Supporters say what residents save in car tax payments is more than the change in the deduction that they will still qualify for."

“The tax relief for middle tax earners is not going to be there" said Rep. David Alexander, (D - Enfield). "I don’t believe the car tax is really going to pay dividends and in the end I worry about the middle income tax earner in Enfield having a tax hike, unfairly due to a lot of spending and it worries me.”

Alexander is one of about a dozen moderate Democrats who share the same sentiment.
House and Senate leaders weren't available for comment Tuesday.

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