Connecticuts Corporate Welfare

The state government of Connecticut, led by Governor Lowell Weicker, Jr. has launched a $6 million advertising campaign to plead “mea culpa” to business and beg its indulgence that from now on Connecticut will be pro-business and not anti-business.

To back up its humble-pie stance in newspaper and television ads in the state and around the country, the government of Connecticut will offer a package of corporate welfare payments that it believes will be irresistible to any self‑ respecting free-loading corporation. Governor Weicker is resolved not to let any other state outbid Connecticut in this lose-lose contest of using taxpayers, workers.and consumers as sacrificial persons on the corporate welfare altar. Study after study since the nineteen sixties has shown that companies do not decide where to locate their plants based on these give-a-ways. The presence of skilled labor, good transportation and schools, access to markets are all much more decisive. The welfare goodies are desserts and the companies are masters at pitting one state’s bid against another’s to get the most fudge.

Remember Saturn. Governors of the states of Michigan, Illinois, Texas, New York etc., etc. joined the frenzied give-away race in almost a grovelling fashion. But Tennessee got the plant — based on central market location, ample, rural labor and other traditional factors.

There is one personal factor that is not discussed but is no longer available in Connecticut. This factor was brought to my attention in a conversation I had with John Nevin, then the head of Firestone Tire and Rubber Company a few years ago. He said that many companies liked to locate in Connecticut because their company executives did not have to pay personally a state income tax. Now they do. The implication was that the absence of a personal income tax on company officials was more important than reducing the corporate tax.

So now Connecticut has jumped into the bidding pit in earnest. For workers, this campaign will mean reducing workers compensation rights further and an easing of worker safeguards enforcement.

For taxpayers, get ready for added indirect burdens such as tax-supported loans and loan guarantees, new corporate property tax abatements and other free land and cheaper public services such as infrastructure hookups.

For consumers, the burden will be deregulation of consumer protection efforts by various state agencies. This is the approach Reagan used, for example, vis-a-vis the auto companies. Result: GM continued to lose market share, close many plants and lay off many workers because its cars were not as consumer‑ friendly and efficient as the foreign competition. Coddling business these ways does not work. The executives become more complacent and keep raising greatly their salaries and bonuses.

To rub it into consumers, Connecticut’s new Aid to Dependent Corporations promotion is billed to them. Five of the six million dollar budget is to be contributed by electric, gas and water utilities. According to the New York Times, “most of that $5 million ultimately will come from residents — through rate increases costing utility customers 12 cents a month on their bills.” The Times’ source for this illicit practice was none other than Joseph McGee, the state’s commissioner of economic development.

And what will the people of Connecticut receive in return for their coerced generosity to these profitable subsidized corporations? Only possibly some jobs at the expenses of taxpayers, other workers and consumers.

If you want to see what corporate welfare, large tax breaks and permissive laws have done for an economy over the past forty years, go down to Puerto Rico, USA and see the exploited workers, the consumer prices, the public poverty and the terrible pollution.