By CHRIS POWELL Maybe other big employers in Connecticut will get an idea from the state Economic and Community Development Department's latest excursion into corporate welfare. Last March ClearEdge Power Corp., owner of the former United Technologies Corp. fuel-cell factory in South Windsor, laid off more than 100 employees. But this week state government loaned the company $1.4 million at a deeply discounted rate, with about half the loan to be forgiven if the company adds 80 employees over three years. Rehiring employees laid off in March will count toward the total of new employees to be added to achieve loan forgiveness. So in Connecticut you now can lay off your workers and then get money from state government for hiring them back. The economic development commissioner, Catherine Smith, explains this as a plan to induce ClearEdge to expand in Connecticut rather than at its facilities in Oregon and California. But the plan will work only at the expense of inviting more big employers to blackmail state government -- not just by threatening to move but also by laying off employees and then demanding that state government ransom them. While the Democratic Party still poses as the party of working people, the “economic development” policy of Connecticut's Democratic administration takes from the poor to give to the rich. Big employers have blackmail power; small employers don't. So small employers and their employees pay more in state taxes to subsidize bigger companies and their employees. Yes, many states are subsidizing big employers this way and inducing subsidy competitions with other states. But since subsidies to big business come at the expense of small business, both in taxes and general competitive disadvantage, the best economic development policy still is a tax and regulation regime that is favorable to all businesses without regard to size. Connecticut's unattractiveness to business and residents alike did not arise from a lack of subsidies to particular businesses but rather from the failure of government generally to provide value even as it has grown and become more expensive. That is, education policy has not been producing more or better education but mainly has just been enriching educators. Welfare policy has not reduced poverty and enabled and required people to start supporting themselves but rather has worsened dependence and anti-social behavior. Connecticut's government employee policies practically forbid ordinary public administration. And so forth. Connecticut's big problem is that the premises of some of its major policies are mistaken or, really, mere pretexts for parasitism. * * * According to a recent study by the state Office of Policy and Management, as reported by the Waterbury Republican-American, revenue foregone by state tax exemptions totals nearly half of state government's tax revenue -- $7 billion in tax breaks against $15.3 billion in receipts. While some broad exemptions may be sensible and command wide support, like the exemption of food from the sales tax, many exemptions are obscure and the product of special pleading or pandering, like the celebrated exemption for clothing and footwear. Legislators propose dozens of such tax breaks every year and some become law, like the one enacted last year to give tax credits for restoring historic houses. Apart from basic decency, which explains the food exemption, there may be only one justification for tax exemptions: efficiency, as when application of a general tax to a specific transaction will forfeit more money than it raises, by driving business out of state. By that standard state government probably could raise billions of dollars or finance billions in general tax reduction by repealing many less compelling tax exemptions. But it has been many years since Connecticut has been able to appropriate that much political courage. Chris Powell is managing editor of the Journal Inquirer in Manchester, Conn.
