The Lamont administration has had a shaky first year on multiple issues ranging from tolls to the prepared-meals tax. But one area where Gov. Ned Lamont is poised to score some points is on his team’s new economic-incentives policies.
Get Instant Access to This Article
Subscribe to Hartford Business Journal and get immediate access to all of our subscriber-only content and much more.
- Critical Hartford and Connecticut business news updated daily.
- Immediate access to all subscriber-only content on our website.
- Bi-weekly print or digital editions of our award-winning publication.
- Special bonus issues like the Hartford Book of Lists.
- Exclusive ticket prize draws for our in-person events.
Click here to purchase a paywall bypass link for this article.
The Lamont administration has had a shaky first year on multiple issues ranging from tolls to the prepared-meals tax.
But one area where Gov. Ned Lamont is poised to score some points is on his team’s new economic-incentives policies.
In this week’s issue, HBJ details the state’s new economic-incentives playbook, which will focus on four key programs, including two new concepts.
It includes a modified Small Business Express program that will no longer offer state loans or grants, but instead morph into a loan-guarantee program run by private banks, and the Grow CT Rebate, which will be provided to companies in certain major industries after they create at least 25 well-paying jobs.
There will also be a greater focus on two existing incentive programs: the Urban and Industrial Site Reinvestment Tax Credit and the Sales & Use Tax Relief Program.
The overall goal is to move toward a performance-based, “earn-as-you-go” system, meaning employers won’t reap state incentives until they create a certain number of jobs or make a certain level of investment.
That will prevent the cash-strapped state from having to clawback funds from companies that fail to live up to their deals.
It also reverses a policy direction set decades ago and put into overdrive by the Malloy administration, which aggressively ramped up corporate incentives that companies benefited from up front, before they invested a single dime or hired a single worker.
The new strategy will not require the state to borrow money to incentivize job growth, although the programs’ annual costs, or what caps might be instituted, haven’t been fully fleshed out.
The state’s new economic-incentives policy, shepherded along by Department of Economic and Community Development Commissioner David Lehman and parts of which will need legislative approval, is a step in the right direction.
And I couldn’t agree more with Lehman’s analysis on several fronts, including his belief that Connecticut shouldn’t have “the best or most aggressive job-creation incentives.”
He also rightfully says taxpayers shouldn’t be paying private companies that simply retain jobs in the state. That type of policy puts Connecticut in a position to be held hostage by companies that threaten to leave unless they get rewarded with a tax break, low-interest loan or grant.
The truth is, economic incentives don’t determine where companies locate. If a Hartford manufacturer uproots and moves to another state or country, it’s because it’s looking for a lower-cost environment, or to be closer to customers or suppliers.
No amount of incentives can make Connecticut cost competitive with states like Texas or South Carolina.
Not to mention that at least 75 percent of the time, incentive-backed jobs would have been created without government support, according to research by Tim Bartik, a senior economist for the W.E. Upjohn Institute for Employment Research in Michigan.
That means governments are literally flushing taxpayer dollars down the drain, while also giving certain companies a competitive advantage over others.
It is possible that Connecticut could lose out on some jobs and investment by being more stingy with its incentives, but the old way of doing things hasn’t been effective either. Connecticut has still not recovered all the 120,300 jobs lost during the Great Recession, even though the state since 2011 spent more than $650 million in loans and grants and hundreds of millions more in tax credits to incentivize job growth. (To be fair, the private sector has fully regained lost recession jobs, while the government sector, including casinos, has not.)
Money would be better spent on workforce-development programs that train residents for the tens of thousands of unfilled jobs in manufacturing, health care and other industries.
And the best economic-development program the state could implement would be providing a more competitive business climate in the form of lower taxes, less regulation, lower energy costs, etc.
We still have plenty of work to do on that front.
