Harding Says Connecticut Can Again Attract More Wealthy Investors

By Scott Benjamin

Connecticut is a two-faced state.

One side faces New York City and the other side faces the rest of New England.

The side facing Wall Street generates a disproportionate portion of the Nutmeg State’s tax revenue.

Greenwich is a hedge fund capitol. The New York Times reported in 2007 that the four zip codes for largest amount of contributions to the presidential candidates for the 2008 cycle were New York City, Silicon Valley, Hollywood and Greenwich.

The Stamford metro area, which features UBS with a trading floor the size of two football fields, was first in the nation in 2012, according to University of California-Berkeley economist Enrico Moretti’s book “The New Geography of Jobs,” with an average annual income of $133,000 for a college graduate.

Gov. Dannel Malloy (D-Stamford) recently told CT News Junkie that the top 1 percent of Connecticut’s earners, many of whom live in the tony Fairfield County Gold Coast, contribute 30 percent of the tax revenue.

Shortly after the April income tax filing deadline state officials increased the projected budget deficit for the two-year fiscal cycle starting in July from $3.6 billion to nearly $5.2 billion.

Why has the capital gains revenue been less than expected when the stock market has been booming since President Donald Trump was elected last November?

State Rep. Steve Harding (R-107) of Brookfield said, “A small number generate considerable revenue. If just a few of them leave the state it causes the revenue to plunge.”

The decline in those receipts appear to be a prime reason for a projected $3.6 billion projected two year budget deficit growing to nearly $5.2 billion after the income tax collections were reviewed late last month.

The Wall Street Journal reported in March that since the 2008 recession, Connecticut has recaptured just 20 percent of the jobs lost in its financial and insurance sector, compared with rates of 77 percent in Massachusetts and 69 percent in New York state.

However, Harding - a member of the General Assembly’s Finance, Revenue and Bonding Committee –said he doesn’t believe the decline in Connecticut’s financial sector has reached the point of no return.

“It can rebound if we reduce spending and keep taxes down,” he said in an interview. “Right now our tax burden is not much less on the wealthy than in neighboring states. We need to keep attracting them to come here.”

Ben Barnes, the secretary of the Office of Policy & Management, the governor’s budget office, has told Ct Mirror that Connecticut’s lower tax burden has attracted wealthy residents that otherwise would live in Rye or Scarsdale, N.Y.

How do you resolve Connecticut’s fiscal state of emergency?

Harding, who also represents the Stony Hill section of Bethel and tiny northern piece of Danbury, said the state needs to get concessions from the employee collective bargaining units on both operating and pension costs.

Those pension obligations are only 35.5 percent funded even though state Comptroller Kevin Lembo (D-Guilford) has praised Malloy for increasing the annual contributions after years of neglect under previous administrations.

Harding said each commissioner then needs to search for ways to run their agencies more efficiently.

Negotiations between Malloy and legislature leadership began this week and Harding said he’s hopeful that a package could be finalized and approved before the June 7 adjournment.

Harding said that some fees were increased in the Republican budget proposal that was unveiled last month just before the projected budget deficit rose. But he said those were handled responsibly, noting that, for example, the revenue from increased marriage license fees will be used for programs helping sexual assault victims.

He acknowledged that the GOP plan will have to be revised now since there is a larger projected deficit.

However, Harding said he will oppose tax hikes, indicating that the measures signed by Malloy in 2011 and 2015 hurt Connecticut’s economy.

He said the shock of the 2008 financial crisis lingers. The national economy only grew a mere 0.7 percent during the first quarter of 2017.

Harding said some of the moderation is healthy, since, according to U.S. Sen. Richard Blumenthal (D-Greenwich), some of the big banks were overleveraged at 40:1, well above the 14:1 ratio that former President Bill Clinton recommended in his 2011 book, “Back to Work.”

During his 2010 campaign for lieutenant governor, Danbury Mayor Mark Boughton said credit card debt was at record proportions in 2007 and that since then many consumers have put more money into their bank accounts, as earlier generations had.

"But we need to reach a healthy midpoint," said Harding.

He said based on his own work as an attorney he still sees too many homes with negative equity following the subprime mortgage crisis that led to the 2008 recession.

U.S. Rep. Jim Himes (D-4) of Greenwich has said that many home-owners with negative equity are reluctant to make a major consumer purchase, which has stifled the economy.

Harding said he supports a proposal by radio commentator Hugh Hewitt in his recent book, “The Fourth Way,” in which the federal government could boost consumer confidence by allowing home-owners to take up to 50 percent from their tax-protected savings without penalty or taxes and pay down or pay off their mortgages.

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