Death Spiral: The Taxes Conundrum
Connecticut just raised taxes…. Again. The state’s two- year $40.3 billion budget includes a projected $1.5 billion increase in tax revenues. The top individual tax rate increased from 6.7% to 6.99%. A “temporary” 20% surtax on corporate taxes became permanent, and was expanded to include what companies earn world-wide, not just within the state.
General Electric has spoken, not so softly and with a big stick. CEO Jeff Immelt issued a press release that GE has formed an “ exploratory team” to look at relocation of its corporate headquarters to “ another state with a more pro-business environment.” While stating that GE supports everyone paying their fair share, Immelt said that Connecticut has raised taxes 5 times on GE since 2011.
While GE can garner press and possibly even results, small businesses are punished. With the vast majority of small biz owners paying taxes personally on all company profits as pass- through entities, these individuals bear a double- whammy that rarely gets much attention.
The “Death Spiral” is real: higher taxes leads to slower growth and exodus for those who can, leads to higher taxes, and the spiral is on. The large majority of the private sector is at its breaking point. Tax breaks for the large corporate entities as an enticement to move in to a state and bring jobs, yet a free ride on the backs of the other taxpayers for funding of years’ worth of necessary municipal services. Maybe Kentucky can make a “good deal” to bring GE headquarters to our humble Commonwealth.