Thursday, July 17, 2014

State Tax Policy

There was a summit yesterday, at the Great River Golf Club in Milford, bringing together many of the best minds in the CT commercial real estate field.  Sponsored by CCIM, it was an entire morning devoted to the current state of the State, from a real estate point of view.  Pearce Commercial was ably represented by Carl Russell, who presented an overview of rental rates, availability, and absorption rates in each of the major submarkets.

The sharpest debate of the day involved an assertion by the keynote speaker from Texas, that CT tax policy was so unfriendly toward business that our State was, and would continue to be, underperforming on a value and desirability basis.  This was later challenged by Catherine Smith, the Commissioner of the Department of Economic Development, who went through what Connecticut is doing to be business-friendly, and to recruit and retain jobs.

 There were two problems with her counterpoints.  One was that she gave answers about what the State is doing, but didn't actually debate the ranking on Connecticut's business and tax parameters (which is pretty hard to dispute, since they are national rankings based on specific criteria, and are well-publicized).  Maybe her programs will change our relative position someday, but not right away.

The other problem is that she, and he, concentrated largely on corporate feelings about doing business in Connecticut, and policies toward business.  The biggest issues now may well be those of personal tax policy, such as the estate tax, the high income and sales taxes, and the lack of deductions available on the personal income tax.  As I learned long ago in business school, corporations go where their CEOs want to live.  If they are fleeing Connecticut, they will take the jobs of others with them.  Without jobs, we cannot prosper.  If one factor other than where they themselves wish to be would influence them, it would probably be the ability to attract key talent.  If other employees refuse to move here due to taxes and perception about the future stability of State growth (and there is some evidence in the relocation field that this is becoming true), they may move to where their recruits want to be.  And, right now, that wouldn't be here.

So, get on the stick, Connecticut!  Stop passing taxes that citizens hate, and do what you've needed to do all along--control union and public sector demands, and balance the budget.

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