“Gov. Dannel Malloy has twice before bet that taxing the wealthy would help solve the state’s fiscal problems,” the newspaper reports. “But neither increase resulted in sustained revenue growth, according to his administration, which says it would be a mistake to do it a third time.”
The New England state faces a budget deficit of $400 million and deteriorating fiscal problems that have led bond-rating firms to lower the state’s credit rating. Connecticut also leans heavily on high-paid hedge fund workers.
“About $200 million of the drop in receipts came from the state’s closely watched top 100 earners, who are the source of an outsize proportion of the state’s revenue,” the WSJ reports. “Many of the state’s richest residents work for hedge funds, which have been hurt by a downturn in the industry.”
Several thousand tax filers in the state have adjusted gross incomes of more than $1 million a year, and they account for about a third of all income tax receipts.
President Donald Trump’s administration has proposed cuts on federal income taxes, but also would seek to eliminate some kinds of deductions, like the ones for state, city and local income taxes. If residents of high-tax states like Connecticut and New Jersey can’t get that deduction, they may seek to move to states with no income tax, like Florida, Texas, Nevada, South Dakota, Washington, Wyoming, New Hampshire and Tennessee.
A hedge fund can operate from anywhere.
Billionaire David Tepper, founder of hedge fund Appaloosa Management, in 2015 moved to Florida from New Jersey, and was said to cost his former home state hundreds of millions of dollars in lost payments, according to the New York Times.
Connecticut Gov. Malloy is seeking $700 million in concessions from public-sector unions and has threatened to fire government staffers. He also wants to eliminate $700 million in state funds doled out to cities and towns.
Public-sector unions say the state’s rich people should chip in more money.
Lawmakers should consider “asking Connecticut’s wealthiest taxpayers and largest corporations to sacrifice and pay a little more to protect the services that people rely on,” Larry Dorman, a spokesman for AFSCME Council 4, the state’s largest public-sector union representing 32,000 government employees, told the WSJ.