He’s leaving and more power to him.
am a born-and-raised Connecticut Yankee. I have been extremely fortunate to have lived the American dream. When I was 18, I left my parents’ apartment in New Haven with two plastic suitcases, not a cent to my name and a dream. Through hard work, a fine education at UCLA and some luck, I began my career in investments in New York City. Twenty-five years later I retired a rich man — many would say extremely rich.
The question I keep asking myself is why should I stay in Connecticut? About 10 years ago, I had 25 to 30 super-wealthy friends here. Today, all but one has moved, most to Florida for tax reasons. I’ve been retired for 16 years — within the next two years, I will be an empty nester — and I am looking for a residence outside our state.
In fact, in March, I signed with a real estate agent to put my Darien home up for sale in May. When I die, and we all do, should I be thinking of what the costs will be to my heirs? I believe I have a responsibility to give them what I can and am asking myself a few questions.
First, as an American, have I paid my fair share? I think most objective people would say yes, as all my money was earned and taxed as ordinary income at the highest marginal tax rates (50 percent in all). When I die, another 40 percent (federal estate tax) of the remainder will go to the government and 12 percent to Connecticut up to $20 million paid. I have used the one-time gift exemption that the federal government allows.
So, over my lifetime, for every dollar that I earned, saved and wish to give to my heirs, I will have paid 76 percent to some government entity and my heirs will get 24 percent.
Is that not paying your fair share?
I can honestly say it never bothered me to pay my taxes. I’m proud to be an American and thankful that I had an opportunity to compete in such a great country. Nonetheless, I would like to leave as much as possible to my heirs.
I have read that it is better to give my wealth away than to die with it. Those familiar with the tax law understand why this is so. When you give money (more than $14,000 a year) to others there is a federal gift tax of 40 percent. Connecticut, however, is the only state in America that has a gift tax, which is 12 percent.
I can understand the state estate tax more than the state gift tax. Why? Because states around Connecticut also have an estate tax (even though this too is changing as they realize the folly of having high estate taxes, which risks pushing out their super wealthy people).
To be the only state that has a gift tax for its extremely wealthy citizens is paramount to erecting a huge sign that reads, “We don’t care if you leave our state. Go!” How much net revenue is raised by the gift tax vs. the loss of tax revenue when your wealthiest residents leave?
Wealthy people have options, especially mobility. If I sell my Connecticut home, move to any other state and then make gifts of my wealth to my heirs, I save them millions of dollars. My super wealthy friends call this the “free move.” You can move out of Connecticut and the gift tax savings more than offsets the cost of the move and the new home purchase. Why wouldn’t anyone do this?
The vast majority of my very wealthy empty nester friends have done this and others in the same position will move when the time is right. It is simply too high a price to stay.
Once a person, family or corporation moves out of state it is almost impossible to get them back. The revenue from their move is gone.
When very wealthy people move, their spending moves with them. Wealthy people are great for the local economy. They shop a lot, buy expensive cars, big homes, expensive jewelry, eat at fancy restaurants and hire many local workers like landscapers, plumbers, electricians, etc.
The political logic in Connecticut seems to be, “When one rich family leaves another will take its place.” That may be true but why not think expansively and ask, “Wouldn’t it be better for Connecticut and our tax base if we could keep all the wealthy families here?”
States try to keep corporations for obvious reasons. Shouldn’t the same logic be used for super-wealthy families? As time goes on, Connecticut’s expenses will only rise and our tax base will decline? Why? Corporations like GE will slowly leave the state for lower tax states and wealthy families will leave too.
Did the state and Federal government make the country better with 50% that they took from him every year? Is the country prosperous due to the spending of that money? Look around. Year by year I’ve been watching the state go down the tubes. Fairly soon it will be cheaper for people like Mr. Delucia to actually abandon their homes and just leave.
Meanwhile, in spite of all the higher taxes that the state has imposed, the only way the state is being run is more or less a “state of emergency.”
Deficits are not just corrosive to confidence in the business climate, but eliminating them through taxes or spending cuts is a drag on the economy.
It comes down to how do you follow short-term pain with longer-term gain? So far the state has been very inept at doing that.
Very little has been done about this problem over the last half-dozen years. We need to look to roll back existing benefits. Rhode Island rolled back cost-of-living allowances to state retirement beneficiaries.
But Rhode Island had more legal flexibility while Connecticut guarantees the overwhelming bulk of its public-sector retirement benefits by contract.
I understand there is a different legal set up, but all of that stuff that is sacrosanct should not be sacrosanct.
We also have a lot of duplication. We’ve got a boatload of state college and community college and University of Connecticut campuses, all of which require lots of well paid administrators. … If this was a business it would not be run like that.
I don’t want to hear that it’s not possible. If we have the courage and the foresight to deal with it, it can be dealt with.
If we didn’t have the obstacle (of current and future projected deficits), we could do better with jobs, we’d have a faster-growing population, we could invest in an updated infrastructure.
In economics, so many things are interrelated.
The financial services and insurance industries absorbed major losses during the last recession, while the recovery has been marked chiefly by growth in the much-lower-paying retail and services sectors. What strategy should Connecticut be pursuing to grow higher-paying jobs here?
It’s hard to address it directly. We do try lure companies to the state by incentives and keep them here by incentives. But you can’t compete with Boston or Massachusetts with that alone.
One of the many reasons we have to go after companies is because we drive companies out.
If you grant that, then it’s going to be a tough road to hoe in Connecticut job-wise, for years to come. All the latest legislature did, vis a vis the [state employee] pension liability, was spread it out over a number of years, reduce the peak but increase the overall cost. It kicked the can down the road and made it bigger.
How much damage did GE’s announcement last year that it would move its headquarters to Boston do to Connecticut’s business image?
What did we lose?
We probably lost several hundred jobs, but these weren’t just extremely well-paid jobs. They were visible jobs.
I don’t think there was a development director in any state or town outside of Connecticut who didn’t drool at our ineptness to deal with the problem. … It was sad to see what was going on.
Even more important than that was the fact that we brought this about with punitive tax legislation…
Despite Connecticut’s reputation as a high-tax state, some point to a study prepared annually for the Council on State Taxation by Ernst & Young. This report, which measures state and local taxes as a share of gross state product, finds Connecticut to have one of the most favorable business tax climates in the country. Is there merit to this sort of ranking system?
I think there is. But I think that a couple of things are important to remember.
It’s not just the level of taxes that are of concern vis a vis the business climate of the state, it’s the gross uncertainty around these taxes that has been with us, particularly over the last half-dozen years. A company like GE or any large company doesn’t know if they’re going to get something big thrown at them or not.
If you were to rank states on anxiety generated by the state budget process, I’m sure we’d rank near the top.
But I also think there is another point to be made. (The Ernst and Young study) doesn’t reflect the full picture of cost. There is the horrendous cost of energy in the state. I don’t know how you measure regulatory burden, but if you’re a large company pondering locating in the Northeast you look at all of these things.
The business community keeps pressing legislators to keep state and municipal taxes flat, insisting this is a prerequisite to any economic growth. But surging fixed costs alone are projected to mandate frequent spending increases over the next 15 to 20 years. Can our economy grow if we are forced, out of contractual obligation, to raise taxes every two-year budget cycle over the next decade or two?
It’s a gamble I wouldn’t be willing to take. I think it runs the risk of leaving us in a worse situation in 10 years. You and I could be having the same conversation a decade from now.
I think what this calls for, in a sense, is the recognition this is a state emergency. It can’t be business as usual. Drastic measures have to be taken.
The State Of Connecticut Hasn’t actually reached the condition of an emergency on the scale of say, Detroit, but if what I see around me is correct, the state is heading there real fast.