by Tom Sevigny
Originally published in The Voice
10.25.02 -- Lurking within Connecticut's budget morass is a scandal. A tax scandal. A jobs scandal. A political accountability scandal. Look up the names and applications of the companies that have received development subsidies—tax abatements, low-interest loans, training grants, infrastructure aid—and then check their performance. Chances are, you will find many companies that have failed to create or retain as many jobs as they said they would. Companies that are polluting the environment. Companies that are breaking the law on a routine basis.
If you think that the Pentagon's $600 toilet seats are outrageous, wait until you find out how much money has been wasted on corporations that are abusing state development subsidies. This is taxpayer money that could be used for education, the environment, expanding health care coverage, or a host of other projects that could improve the quality of life of Connecticut's citizens.
Corporate welfare is the dirty big secret kept by the state legislature and the governor. They aren't watching the store and they don't know the value of what they have given away. This is an issue whose time has come because the subsidy giveaway game is hurting the people of Connecticut. It is a root cause of our state's budget crises and is causing homeowners and small businesses to get stuck with ever-higher taxes to make up the difference. It is time to tell the corporations that the candy store is closed.
In 1994, corporate tax rates in Connecticut decreased from 11.5% to 7.5%—the lowest of all adjoining states. (As a matter of fact, two-thirds of Connecticut's corporations currently pay only $250 in corporate income tax and 2,100 big businesses don't pay any taxes at all.) When these corporate income tax cuts are added to other tax incentives the Connecticut legislature gave to corporations during the 1990s, the bottom line is $2.77 billion in total tax cuts for corporations. Overall, corporate taxes as a percentage of total revenues fell from 19% in 1991 to just 7% in 2002. The result has been a major tax burden shift from big business to individuals.
Here are some examples of the money we have wasted:
- The Norwalk-based Trafalgar Company received close to $1.4 million in state subsidies from the Connecticut Development Authority in 1995 and 1996, promising to create 200 jobs. Not only did they fail to create any jobs, but their existing jobs pay little more than the minimum wage.
- Stanley Works took $5 million in state and local aid from 1994 to 1997, and then three years later announced major layoffs while rewarding the CEO with a $12.5 million compensation package and attempting to move offshore to avoid even more taxes.
- In 1993, Rand Whitney received state and local tax abatements and was expected to retain 200 jobs at their Montville paperboard plant. However, in 1994, Rand Whitney closed part of the plant, and eliminated 165 jobs.
- Waterbury Rolling Mills received almost $2 million from the state in 1996 to create just 11 jobs. This despite the fact that they broke employee safety laws between 1990 and 1996 and has at least one Unfair Labor Practice decided against it during those same years.
Advocates of tax breaks and subsidies for corporations would say that these are only a few examples and are not indicative of the overall positive result such tax abatements have had for the state. To that argument I would present this data: Between 1992 and 1998, 441 Connecticut corporations received subsidies greater than $250,000. Of these 441 corporations, a third actually eliminated jobs and another 18% created no new jobs. In other words, our money is being wasted.
If elected, I would propose legislation that would set standards for state economic development assistance. Such legislation would require companies receiving subsidies to obey all state labor, safety and environmental laws; require pay levels at least at the standard wage for the industry for any new jobs created; and, most of all, require companies that move out of state, eliminate jobs, or fail to add any jobs to pay the state back. Corporations will continue to feed at the candy store if we keep the door open. It is time we closed the door.