Sullivan was the guest speaker for the April meeting of the Chamber's Public Policy Committee this morning, and it was no April Fool's joke. Members of the committee (which regularly meets on the first Friday of the month), got to hear his thoughts on a number of state budgetary issues, ranging from the reasons tax revenue has fallen, to the viability of tax credits, to his thoughts on why General Electric chose to move its HQ to Boston.
Here are some highlights:
* Tax revenue is down primarily because, a) there is a "tangible and meaningful out-migration" of people from the state, and b) we've replaced a lot of high-paying jobs with much lower-paying jobs.
Sullivan noted that in December 2015, the state collected $173 million less in income tax revenue than it collected a year earlier. Ouch.
* Legislators love tax credits, but he's not a fan of them, saying that, with some exceptions, most have no "demonstrative value" to the economy. One credit he likes is the Research & Development credit, and that's no surprise, since a study shows the R&D credit has a 30-to-1 return on investment. I recently filed testimony with the Finance, Revenue & Bonding Committee in support of SB 399, which would restore the R&D tax credit to its full 70% value within the next two fiscal years.
In answering a question from Jack Traver Jr., of Traver IDC in Waterbury, Sullivan did say he supports applying certain tax credits (including the R&D tax credit) to all companies, including S and C corporations.
* One of the better points he made is that the tax code in every state, and the federal code for that matter, "has been written for an economy that no longer exists." He said tax codes need to be updated to the service-industry dominated global economy of the 21st Century.
* As for GE, he noted that when compared to a major state employer like United Technologies Corp., GE is a minor employer in Connecticut. He also noted that while moving GE's HQ to Boston means a loss of about 500 jobs in Connecticut, it still will have 5,000 production jobs in the state and losing those jobs would have hurt a lot more. He also said GE narrowed its choices for relocating its HQ to three "high-cost states," and ended up choosing Massachusetts — where, if not for its $145 million in tax breaks, its tax burden would be higher than it was in Connecticut.
In summing up his presentation, Sullivan noted what most of us already know, but which the state legislature apparently still needs to come to grips with: with the continued decline in revenue, the state "is going to have to start doing less with less."