Take The Money And Run

Chris Davis -- CTNewsJunkie

Xerox Corporation, headquartered in Norwalk, was not the first, nor will it be the last, of Connecticut’s anchor companies to take the money and run. The administration of former Governor Dannel Malloy, desperate as it was generous, lathered Xerox with $4.4 million in loans 2017, in return for which the company promised to keep 150 jobs create 40 more in four years, according to a piece in the a Hartford paper.

The additional jobs would in turn produce additional taxpayers, who would as the years rolled by swell the state’s treasury with additional dollars. Malloy, a life-long politician rather than a businessman, at least got that part of the economic equation right: more taxpayers equal more tax revenue. Corollary 1: tax reduction – albeit only for targeted industries – increases revenue. Corollary 2: tax reduction good, tax increases bad.

With these operative economic truths staring him in the face, Malloy went on to raise taxes twice, thus producing business and entrepreneurial flight, which reduces revenue in the long run for everyone but those companies the state chooses to favor with tax deferments or bonding gifts. And yes, infusions of bond or tax money into the coffers of favored businesses are equivalent to targeted tax reductions for the favored businesses and, most importantly, for no one else.

Taxpayers lose when government chooses “winners” in this way because their tax money is being used, many times fruitlessly, to bribe companies from moving operations into other states in which the business environment is more conducive to growth. In Connecticut’s non-growth economy, a tax credit given to A is taken from B. The bond money pumped into Xerox – to mention only one of many companies that have taken state gratuities and set up operations in other states – is tax money that, given Connecticut's mile deep debt obligation, cannot be spent on, say, improving public education in the state’s chronically under performing schools, a point often made in the past by “socially conscious” Democrats in the state’s General Assembly.

Companies  not favored by politicians with bond handouts, tax credits and multi-year long tax reductions are also losers, because favored companies – winners chosen by politicians grateful for campaign donations that flow their way from favored companies – are given an edge over their competitors, and all companies who are not treated similarly are enrolled in a losing lottery .

Taxpayers invariably lose in such transaction for two reasons: 1) either tax resources are given to multimillion dollar companies who do not need such favors to prosper in a competitive business environment, or 2) they are given to failing enterprises, in which case the state’s poor “investment” likely will not pay tax dividends to Connecticut in the long run.

Then too, there really is no mechanism -- and certainly no legislative will -- to recover tax losses when favored companies default on their gentlemen’s agreements with governors and legislators and, as might be expected, take the money and run, even after the companies may have satisfied the extremely liberal demands made upon them; really, is a promise to create 400 jobs within four years from a Fortune 500 company that last year posted revenue of $9.8 billion worth $4.4 million in loan guarantees?  This appears to have been the case with Norwalk based Xerox and other companies in Connecticut that have effectively defaulted on the spirit underlying such agreements. Fool me once, the old adage has it, shame on you; fool me twice, shame on me. Connecticut Democrat governors and General Assembly members are, in this respect, shameless – perversely determined NOT to learn from their past humiliating mistakes.

When Connecticut’s bond commission, most of the members of which have been appointed by Democrat governors, awarded Xerox $4.4 million in conditional loans, did any of the members recall the subsidies awarded to Pfizer years earlier or Susette Kelo's 'Little Pink House' ?

Only one member of Connecticut’s Bond Commission, Republican State Representative Chris Davis of Ellington, voted against the Xerox proposal. Davis said at the time that because Connecticut was cutting social programs, he could not in good conscience vote in favor of bonding Fortune 500 companies. Davis also opposed the Democrat’s $15 dollar hour minimum wage boost and over generous paid family leave bill because he was certain such artificial labor costs increases would chase Connecticut based companies to more business friendly states such as North Carolina.   

Unfortunately for Connecticut, such prudent and courageous legislators do not grow on trees. It has always been easier in Connecticut politics to bend the knee to give-away programs than to act prudently to advance the public good.