Connecticut still has a way to go to become ‘open for business’
In a recent commentary, several eminent founders of the public/private partnership Advancect took to the Courant ’s pages, claiming that over the past five years, Connecticut has become “a premier destination for businesses, large and small.” [Feb. 11, Opinion, Page 2, “Connecticut is open for business”]. They hail our state’s rise from “near the bottom of practically every business climate survey.”
The efforts of Jeffrey Sonnenfeld, Indra Nooyi, James Smith and Margaret Keane in developing Advancect.org and convincing businesses to relocate to Connecticut are, indeed, commendable. Their love for our state is obvious; Gov. Ned Lamont is wise to have enlisted their aid, and fortunate to have benefited from their wisdom and hard work.
But their rosy outlook is, perhaps, premature. Connecticut businesses struggled to recover the 266,000 workers lost since March 2020 due to COVID-19 and lockdowns.
Last August, the state finally regained all workers lost, much more slowly than the majority of states. But the pace of job growth hasn’t increased since then, suggesting that Connecticut is far from a destination for workers, or businesses. In fact, just last year, 700 U.S. CEO’S ranked Connecticut No. 42 in Chief Executive’s “Best and Worst States for Business.”
The op-ed more accurately captures the optimism of established and well-resourced big business, rather than the experiences of our state’s struggling medium-sized and small businesses. Prominent business climate surveys reveal that the Constitution State is an inhospitable environment for littler fish in the commercial pond:
Forbes’ “Best States to Start a Small Business in 2024” ranks Connecticut 30 out of 50.
Tax Foundation’s “State Business Tax Climate Index,” the most comprehensive tax ranking, has ranked the state 47th best 10 years in a row from 2014-2024.
Wallethub ranks
Connecticut 49th on its “Best States to Start a Business.”
The Advancect website touts the “industry-specific and targeted geographical incentives” intended to lure existing companies to our state. In fact, since 1992, Connecticut has handed out a whopping $6 billion in subsidies and below-market loans to favored businesses — the 10th
most nationally on a per capita basis. By comparison, Massachusetts — which has maintained a population about twice Connecticut’s size for three decades — has provided business with only half that amount.
What’s more, such subsidies often are lavished on specific, favored companies, rather than being used to reduce regulations and taxes, which would allow all businesses to thrive. To make matters worse, these payments are often structured so that Connecticut has no recourse if the subsidized company closes (as was the case when Blue Sky Studios received a $32 million tax credit payment from Connecticut two weeks before Disney shut it down in 2021).
The authors write: “Although Connecticut has long been criticized for high energy costs, that is quickly changing as Connecticut emerges as an epicenter for clean energy.” True, millions of the state’s taxpayers’ dollars have been funneled into clean energy policies, like the Renewable Portfolio Standard. But this has raised, not lowered, electricity prices. Connecticut has consistently found itself placing top five for most expensive industrial and commercial electricity prices in the continental U.S. This is a deterrent to companies
settling in Connecticut, not an incentive.
This isn’t the only deterrent job creators confront. We have a legislature that too often seems unaware of the challenges of running a business — while constantly creating new tax and regulatory proposals that make it more expensive for a smaller enterprise to operate. This year, some are pushing mandated paid sick time for small businesses; last year, there were bills requiring 30 hours of paid leave for employers with a workforce of 11 or more (and 40 hours of unpaid leave for those with 10 or fewer workers). They even dictated parttime benefits.
Our legislature has even failed to make common-sense changes that would make it infinitely easier for our small and medium-sized businesses to operate — like allocating money for an updated Department of Revenue Services website. It would ultimately save money by requiring fewer IT employees to staff the phones, while generating more tax revenue from new businesses that survive.
New business owner Aaron Vnuk went through an arduous process to register a Crossfit gym in North Haven with the Department of Revenue Services. He recalls spending
45 minutes on the phone with a government employee to activate his account, and reports that the DRS website is needlessly complex, often undergoing “maintenance during the weekends.”
Advancect is right to welcome every company that chooses to relocate to Connecticut. Its 2023 annual report highlights four: A&M Bronx Baking, Weinberg Properties, Fullstack Modular and Refined Payments. Notably, all of them relocated from New York, three from the city.
Eventually, however, New York City, one of the most taxed cities in the country, will stop hemorrhaging companies — either because it finally becomes more competitive, or because all the companies that can possibly relocate have done so. Connecticut must be prepared to compete on a national, rather than regional, basis.
The leaders of Advancect have every right to be proud of all they have accomplished. But it’s important to ensure that all our job creators are positioned to thrive — and that our smalland medium-sized businesses aren’t left behind.