Why Connecticut Lost GE by Aaron Renn
Aaron Renn, City Journal
Why Connecticut Lost GE by Aaron Renn
Connecticut’s business climate is poor. The Tax Foundation ranks its business-tax environment 44th in the country. GE’s decision to move is part of a larger story. Changes in the economy and culture, and improvements in governance of cities, have created a profound competitive challenge for Connecticut, one without easy solutions.
For decades, nearby New York City’s pain was Connecticut’s gain. New York was a grim, dangerous, failing city that almost went bankrupt in the 1970s. More than 100 Fortune 500 companies fled during that era, many heading to suburban New Jersey and Connecticut—including GE, which moved in 1974 from 570 Lexington Avenue to Fairfield, Connecticut. The same story played out in cities across America, with corporations fleeing dying downtowns for the safety of the suburban office campus.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTToday, cities are back. The policing revolution—helped by the waning of the crack epidemic—made cities safe again. Core public services were slowly restored, parks were rebuilt, and transit systems were cleaned up and refurbished. Investment started returning. The structure of the economy changed, too. Starting in the 1990s, technology radically transformed the business world and is now a major industry in its own right. The financial industry was deregulated. Globalization drove demand for new types of business services, reinforcing the need to stay on top of a constantly shifting landscape. People with advanced, specialized knowledge are the ones who help companies innovate now. These employees work in highly interactive ways that benefit from clustering together—disproportionately in urban areas like New York, Chicago, and Boston.
Big cities have become increasingly desirable to the young. The children of those who fled to suburbs to escape urban decline have embraced city living. Unlike the Baby Boomers, who were raised in an era when cities were getting worse and worse, the Millennials came of age as cities were being reborn. This produced a completely different psychology. With a larger segment of the next-generation workforce located in urban areas—and often not owning cars—many companies have had to open downtown offices again or relocate entirely to attract the talent they need.
As a result, the urban cores of New York City and Chicago have hit record employment levels. Companies like Google that didn’t even exist in the bad old days of the seventies and eighties now employ thousands of people in downtown environments. Manhattan is Google’s second-largest engineering office outside Silicon Valley. Boston has become a dominant location for biotech, with Cambridge’s Kendall Square alone adding over 10 million square feet of biotech space since 2009. It’s not surprising that the increasingly tech-driven GE is moving to Boston. Not only is Boston the premier urban center in New England; it has also long been America’s traditional second city of technology.
The tide of business relocation has turned against Connecticut. While not all downtown business districts are booming—those in New Haven, Hartford, and Bridgeport certainly aren’t—Connecticut happens to be located between two of the most resurgent ones in the country. In the old environment, Connecticut didn’t have to work that hard to attract business. Even today, its tax-climate rank of 44th is better than New York State’s (49th) and New Jersey’s (50th). For years, Connecticut could get away with being the best house on a bad block. During the seventies and eighties, corporations exiting decaying downtowns made a beeline for the suburbs—and for many, that meant Connecticut. Today, the flow of firms is just as likely to be going in the other direction. And the rise of the technologically enabled business means that it’s now possible to scatter even white-collar functions all over the globe. Connecticut is competing for the highest-end jobs not just with downtowns and regions in other states but also with cities around the world.
It doesn’t matter anymore that Connecticut’s tax environment is (marginally) better than New Jersey’s. Businesses can go anywhere. The finance industry, for example, has found places like Charlotte a much more congenial location to set up shop. The suburban office park is not going away, but in the future, it’s headed for places like Houston, where ExxonMobil is building a 10,000-employee campus; Dallas, where Toyota is setting up its North American campus; or even Bangalore, with its massive outsourcing operations. All these locales have vastly superior cost climates to Connecticut, which has little chance of attracting any business that doesn’t have a clear geographic requirement for being in the northeastern United States. Unsurprisingly, while even the less-than-stellar national economy grew total jobs by 5.3 percent from 2000 to 2014, Connecticut’s job growth was down 1.6 percent. Connecticut is increasingly the odd man out, falling short both to resurgent downtowns and to cheaper Sunbelt and global cities.
All is not lost. Connecticut still has advantages in its high-quality workforce and proximity to New York City. But rather than adjusting to new realities, Governor Malloy added insult to injury with his tax increases. GE’s departure should be a wakeup call in Hartford that marketplace patience with the state’s harsh business climate is wearing thin.
Aaron M. Renn is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
RI Business Rankings in US
WalletHub
Rhode Island has 2015's eighth highest insurance premium penalties for high risk drivers, according to a WalletHub report.
Rhode Island ranks fifth overall in the category of speeding over 20 mph annual premium increase at $482. While ranking third overall in the category of 2 accidents annual premium increase at $2,721.
Rhode Island ranks ninth overall under the reckless driving annual premium increase at $749.
WalletHub
Rhode Island has been ranked as the 8th most eco-friendly state in the country, according to a recent study by WalletHub.
Rhode Island ranks third in environmental quality and 16th in Eco-Friendly Behaviors Ran landing them in 8th overall.
RI is behind Washington and New Hampshire who are in the six and seven spots respectively, and in front of Connecticut and Hawaii who come in at the nine and ten spot.
WalletHub
Rhode Island is 2015's 4th Worst State to be a taxpayer, according to a recent WalletHub report.
Rhode Island ranks 48th of 51 with an average state and local tax price of $7,159 which is good for a 27% difference from the national average.
The states that are directly behind Rhode Island are Wisconsin at $7,159, Nebraska at $7,298 and Illinois at $7,719 for a 37% difference from the national average.
WalletHub
Rhode Island has the highest vehicle property taxes in the country, paying an average of $1,133 according to a report from WalletHub.
Virginia and Kansas are the two states just ahead of Rhode Island in the 49 and 50 spots, paying $962 and $905 respectively.
RI also ranks 42nd in average real estate tax, paying an average of $2,779, according to the WalletHub report.
WalletHub
WalletHub has ranked Rhode Island as the 7th worst state to be rich in in a recent in depth analysis of 2015's Best States to be Rich or Poor From a Tax Perspective.
On a scale with 1 being the best, and 25 being average, Rhode Island ranks 37th in low income earners, 42 in middle income earners and 45th in high income earners.
To see the full report, click here.
Gallup
Providence-metro ranks at the bottom for job creation in 2014
Rhode Island has been ranked amongst the worst in job creation, according to a recent survey done by Gallup.
Gallup gives the Prov-metro area an index score of 23, the lowest score is the New York- New Jersey area with 20.
Salt Lake City, Utah and Austin-round Rock, Texas rank the highest with a score of 37.
See the rest of the rankings here.
Forbes
The 2014 state rankings by Forbes has just been released and Rhode Island moved up two spots from #48 in 2013 to #46 in 2014.
What does Forbes say about RI's business environment"
After Michigan and Illinois, Rhode Island has experienced the third worst net migration out of its state in the country over the past five years. With a recent unemployment rate of 7.6%—lower than only Georgia and Mississippi—residents are leaving the state in search of jobs. Rhode Island has been stuck in the bottom five overall for six straight years. One plus: labor costs are 5% below the national average, which stands out in the expensive Northeast.
Tax Foundation
Findings from The State Business Tax Climate Index were released this morning by Tax Foundation which found Rhode Island to have the 45th best tax climate for businesses for 2015. The state's rank has not changed since last year after The Index analyzed 100 different tax variables in multiple categories.
Read more about the report here
WalletHub
After conducting an online suvery consisting of 1,050 individuals from both parties across the nation, WalletHub ranked Rhode Island as having America's 33rd fairest tax system.
Click here to view the poll's entire findings
Thumbtack/Kauffman
Providence is the second worst city in America for small business, according to a new survey conducted by Thumbtack.com and the Kauffman Foundation.
More than 12,000 small businesses in 82 cities across the country participate in the survey. Providence received an overall "F" grade for small business friendliness.
The Economist
Small Business Friendliness Grade: F
The Economist grades states on an A+ to F grading scale for its small business climate. Rhode Island is one of just 6 states to earn an "F" grade.
Overbearing bureaucracy and excessive licensing is stifling small business in America.
Read More About The Economist Grade Here
CNBC
CNBC ranks each state in cost of doing business, economy, technology and innovation.
Rhode Island's unemployment rate as of May 2014 was 8.2 percent. This is RI's lowest unemployment rate since August 2008.
Read More About CNBC Ranking Here
Forbes
Forbes ranks each state in business costs, economic climate, and growth prospects. RI is third worst in 2013.
The most damning in the commentary:
After Michigan, Rhode Island has experienced the second worst net migration in the country over the past five years.
Read More About Forbes Ranking Here
ChiefExecutive.net
#39 ChiefExecutive.net
ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.
The most damning in the commentary:
Sky-high unemployment rate bespeaks continuing terrible business climate.
Read More About ChiefExecutive.net Ranking Here
Tax Foundation
#46 Tax Foundation
Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.
Rhode Island and the other states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.
Read More About Tax Foundation Ranking Here
Wallet Hub
#24 Wallet Hub
Wallet Hub ranks each state in ROI rank, state tax rank, and overall government services.
Rhode Island ranked #50 for worst roads and bridges, but ranked #4 in safety.
Read More About Wallet Hub Ranking Here
ALEC
#47 ALEC
ALEC ranks each state in economic performance and outlook.
Although Rhode Island ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.
Read More About ALEC Ranking Here
Kauffman Foundation
#50 Kauffman Foundation
Kauffman Foundation ranks each state in entrepreneurship.
Entrepreneurial activity generally is highest in Western and Southern states
and lowest in Midwestern and Northeastern states.
Read More About Kauffman Ranking Here
Free Enterprise
#47 Free Enterprise
Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.
Rhode Island has continued to feel the direct impact and ripples from the recent recession—it ranks 47th overall in economic performance. However, positive rankings of 15th in talent pipeline and 16th in innovation and entrepreneurship suggest the existence of a foundation on which to build the future.
Read More About Free Enterprise Ranking Here
The Pew Charitable Trusts
#40 The Pew Charitable Trusts
The Pew Charitable Trusts ranks each state in job growth and job creation.
Rhode Island added 6,223 jobs in 2014.
Read More About The Pew Charitable Trusts Ranking Here
Gallup
10th Worst in Gallup's Annual Ranking of State Job Markets 2014
Rhode Island has been ranked 10th worst for job creation in Gallup's annual ranking of state job markets in 2014 with a job creation index number of 21
Rhode Island is one of two (Connecticut) states to rank in the bottom ten each year since 2008.
The 2014 State level findings have were drawn from 201,254 interviews with employed adults across the nation.
See the full list of rankings here.
