Is Connecticut Self-Destructing?

Checking in on the most popular stories of the year on RealClearPolicy, I find that one of them is "Why Connecticut Is Self-Destructing," by Lewis Andrews.  The story dates from June 9.

"Self-Destructing" is a rather strong term.  Is it a fair characterization of the situation in Connecticut?  I'd say it's an exaggeration, but not by much.  Without doubt, Connecticut should serve as a warning to other states of where the blue state model of governance leads.

The immediate inspiration for Andrews' article was the passage of Connecticut's budget in June.  That budget included major tax increases, particularly on corporate entities, notably a permanent 20% surcharge on the corporate income tax and a new rule imposing taxation on corporations' foreign earnings.  According to Andrews, those changes brought Connecticut's tax burden to the third highest in the nation (although he doesn't say where he gets that figure; a Tax Foundation study from November 15 ranks Connecticut 44th of 50, or 7th worst, for "business tax climate").  The changes also brought threats to leave from several of the state's largest corporate employers, among them General Electric, Aetna and Travelers.  So far none of those has left, but then these things don't happen overnight.  So Andrews asks:

How did Connecticut, which just over two decades ago had no income tax and was widely known as "the Switzerland of New England," so quickly become the third highest-taxing state in the nation, the most indebted on a per capita basis, and, according to Barron's, the worst managed?       

Are things really that bad in Connecticut?  It's still at or near the top in the state rankings by  income.  In this ranking based on 2010 - 2013 U.S. Census data, Connecticut ranks first by per capita income (although D.C. is substantially higher) and fourth by median household income.   But its top income position has been gradually eroding.  According to data from the Connecticut Department of Labor here, the number of jobs in the state has been almost perfectly stagnant for 25 years:  1,640,000 jobs in 1990 and 1,690,000 jobs in 2015.  That would be "growth" of about 0.1% per year.  1990 would be just before the enactment of the state's first income tax in 1992.  It started at 1.5%.  Today the top rate is 6.7%, just a hair shy of New York's top rate. 

Remarkable about Connecticut is the concentration of the wealth in the New York suburbs in the southwest area of the state, and the simultaneous abject poverty of all the cities.  Among the states, Mississippi has the lowest per capita income at $20,618 (2014 data).  Here are the per capita income numbers for the main Connecticut cities:  Hartford, $16,798; Bridgeport, $19,854; New London, $21,110; Waterbury, $21,545; and New Haven, $21,789.  Whatever they are doing to ameliorate the income inequality is completely falling on its face.

So how is the new budget working out?  On November 10 the Hartford Courant reported that the tax revenue from the newly increased taxes was running some $600 million below projections (over two years), on a total annual budget of about $26 billion.  An emergency legislative session earlier this month claims to have fixed the problem, for the moment.  The big employers in Stamford all seem to be in a Perils-of-Pauline game of downsizing and/or departure.  Pitney Bowes has just sold its headquarters building and downsized its operation substantially.  The big banks with operations in Stamford, notably UBS and RBS, repeatedly threaten to close and move away, although maybe they'll stay a little while longer for a big enough bribe from the state.

Connecticut is a tremendous lost opportunity.  It has opted for high taxes and a period of gradual relative decline compared to other states.  The lost opportunity is particularly tragic for the basket case cities and their inhabitants.