Free Daily Headlines :

  • COVID-19
  • Money
  • Election 2020
  • Politics
  • Education
  • Health
  • Justice
  • More
    • Environment
    • Economic Development
    • Gaming
    • Investigations
    • Social Services
    • TRANSPORTATION
  • Opinion
    • CT Viewpoints
    • CT Artpoints
DONATE
Reflecting Connecticut’s Reality.
    COVID-19
    Money
    Election 2020
    Politics
    Education
    Health
    Justice
    More
    Environment
    Economic Development
    Gaming
    Investigations
    Social Services
    TRANSPORTATION
    Opinion
    CT Viewpoints
    CT Artpoints

LET�S GET SOCIAL

Show your love for great stories and out standing journalism

Study: To fix economy, invest in roads and schools, not tax breaks

  • by Keith M. Phaneuf
  • September 20, 2010
  • View as "Clean Read" "Exit Clean Read"

While a new academic study finds that New England states can best grow their economies by choosing infrastructure and education investments over business tax breaks, Connecticut’s gubernatorial candidates say it could take a mix to revitalize the state.

The report, written by a research professor at the University of Massachusetts Political Economy Research Institute, concluded state and local infrastructure projects are particularly effective at creating jobs, both in the short- and long-term, while the bulk of jobs reportedly produced by tax incentives would have been created regardless of these policy changes.

“Instead of trying to lure firms with deals and lower corporate taxes, an approach to economic development that builds the skills of the current and future workforce, improves the physical infrastructure of regions and makes communities more attractive places for families and firms represents a more effective use of a state’s scarce resources,” Professor Jeffrey Thompson, a specialist in labor economics and public finance, wrote in his report.

Infrastructure investments are particularly beneficial for New England, where the roads, bridges, ports, water treatment facilities and energy production and transmission networks businesses rely on have suffered from state and local investments below the national average for nearly a decade and a half.

The state Department of Transportation projected earlier this year that a $926.4 million gap exists between the cost of planned highway, bridge and transit projects for the next five years, and the level of projected available funding needed to upgrade an aging, overcrowded network.

State and local infrastructure projects are particularly effective in the short-term, Thompson wrote, because the leverage additional federal aid and often private dollars, and rely heavily on local workers, equipment and raw materials.

On average, state infrastructure investments alone in Connecticut will produce 11.6 new jobs per $1 million invested, and a 20 percent match in federal spending would boost the number to 14.1 jobs, the report estimates.

The return on education and other worker skills-related programs aren’t as immediate as those tied to infrastructure, but they still offer more guaranteed results that those sought through tax incentives, the report states.

A 2003 study of community college students in occupational and vocational training programs in Connecticut and 11 other states showed their average earnings were $400 more per quarter than students who didn’t receive that training or go on to a higher level of education, Thompson noted.

Another study found training grants in Massachusetts launched just over a decade ago helped community colleges and private employers to create thousands of export-related jobs at a cost of less than $9,000 per job, he added.

By comparison, Connecticut and its neighbors shell out huge dollars annually for tax breaks, with a large portion at least partially directed toward businesses.

Connecticut has nearly $350 million in corporate tax breaks on its books, according to the legislature’s Office of Fiscal Analysis. Just over two decades ago, it had $3 million worth of corporate tax credits and exemptions.

Massachusetts has seen similar growth, jumping from $1.25 billion in economic development tax incentives in 2002 to $1.7 billion now, the Thompson report states.

But Thompson argues that the net benefit of these state credits is limited by its very nature.

“If one region lures jobs through tax incentives at a neighbor’s expense, there is no net benefit to the region or the county,” he wrote.

A 2008 study by a San Francisco Federal Reserve bank economist found that nearly all of the resulting increase comes at the expense of reduced  spending in other states, and typically leads to a pattern of competing, reciprocating incentive programs between neighboring states.

Both of the major-party candidates in Connecticut’s governor said they largely agree with Thompson that tax incentives should not be a primary tool, but added they aren’t ready to leave it out of the tool box entirely.

“Generally these ideas for offering tax incentives for companies to come here or stay here too many times turn out to be not such a good investment.” Republican Tom Foley said. “We already have a lot of assets here.

Foley carved out one important exception, and that was to offer no credits to small businesses, a group he has argued is both struggling and crucial to the state’s economic recovery.

Democrat Dan Malloy expressed similar reservations, adding that tax incentives could drain crucial resolves needed to bolster other programs such as transportation enhancements.

But Malloy said Connecticut still has to make some strategic investments, such as offering both incentives and developing “first class research facilities” at locations like the University of Connecticut Health Center, to promote stem cell research and other cutting-edge bioscience technologies.

Third-party candidate Tom Marsh, is reluctant to back any tax incentives. “I’m not a big believer in offering special incentives to businesses,” he said. “It kind of creates a fake economy.”

But Marsh found common ground with both Foley and Malloy in agreeing Connecticut’s next governor must review all of the existing business tax breaks, including more than $3 billion in sales tax exemptions.

Those that are not protecting jobs and providing necessary relief to a broad base of consumers need to be repealed, Marsh said.

Connecticut Business and Industry Association economist Peter Gioia, and UConn economist Fred V. Carstensen, who heads the Connecticut Center of Economic Analysis, also cautioned against any blanket ban on tax incentives.

“You need to create an aura of certainty and confidence in the business community,” Gioia said, adding that doesn’t necessarily require adding new tax breaks, but it does involve controlling government spending and avoiding tax hikes, adding that cancelation of a wide array of existing breaks would be viewed as a tax increase by another name.

Carstensen said that while investments in transportation and education are crucial to Connecticut’s economic future, poor decisions can be made in these areas as well.

State government has invested billions of dollars since the mid-1990s on capital projects at state colleges and universities but Carstensen said it has allowed spending on academic programs to dwindle over the same period.

“We have fewer faculty (at UConn) now than we did in 1995,” he said. “We have an engineering school that is woefully inadequate compared to the needs of the sector. It’s all about making smart investments.”

Sign up for CT Mirror's free daily news summary.

Free to Read. Not Free to Produce.

The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.

YES, I'LL DONATE TODAY

ABOUT THE AUTHOR

Keith M. Phaneuf

SEE WHAT READERS SAID

RELATED STORIES
Connecticut’s $90M lobbying industry has a new player: former Speaker Joe Aresimowicz
by Mark Pazniokas

Former House Speaker Joe Aresimowicz is becoming a lobbyist, but a revolving-door law limits him for a year.

Spiking tax revenue will wipe out state budget deficit, analysts say
by Keith M. Phaneuf

Projected state revenues skyrocketed by $1.7 billion Friday, positioning officials to balance the next state budget without tax hikes.

Judge approves shorter sentence for convicted murderer turned prison mentor
by Kelan Lyons

The DOC could start screening Clyde Meikle in July for discharge to a halfway house.

Without vocal dissent, Senate confirms Justice Andrew McDonald
by Mark Pazniokas

The state Senate acted quickly Friday to confirm Andrew J. McDonald to a second term on the Supreme Court.

Funding to fix CT’s roads and bridges is drying up, and officials don’t have a solution
by Keith M. Phaneuf and Kasturi Pananjady

Connecticut's transportation building program is on a financial diet after a five-year ramp-up after lawmakers rejected tolls.

Support Our Work

Show your love for great stories and outstanding journalism.

$
Select One
  • Monthly
  • Yearly
  • Once
Artpoint painter
CT ViewpointsCT Artpoints
Opinion Evidence not clear that Trump incited Capitol destruction
by Alan Calandro

Defending President Donald Trump is not popular and I have no interest in writing this other than adherence to truth. Recognizing the truth (if we can find it, which is not always possible of course) should make us be able to come together around that and move on with a common understanding.

Opinion Securing our nuclear legacy: An open letter to President-elect Joe Biden
by Erik Assadourian

Dear President-elect Biden: As you noted in a tweet shortly after protestors stormed the Capitol on Wednesday, “Today is a reminder, a painful one, that democracy is fragile.” Indeed it is. And so are nation-states.

Opinion Last votes of George Floyd, Breonna Taylor and others
by Gary A. Franks

Finally, the election season is over. The historic elections we saw in this cycle were intriguing. The runoff elections for the U.S. Senate in Georgia put a cap on the campaign season. For many people this could be described as a COVID-19 election. I would argue that this was an election influenced by a pandemic but determined by the killing of unarmed Black people with no adequate justice for the Black community.

Opinion Not just environmental problem; Killingly plant is a great target
by Joel Gordes

In 1990, I was one of five legislators to introduce the first climate change legislation that became PA 90-219, An Act Considering Climate Change, the most popular bill of that session. Back then I considered climate change a national security issue… and I still do.

Artwork Grand guidance
by Anne:Gogh

In a world of systemic oppression aimed towards those of darker skintones – representation matters. We are more than our equity elusive environments, more than numbers in a prison and much more than victims of societal dispositions. This piece depicts a melanated young man draped in a cape ascending high above multiple forms of oppression. […]

Artwork Shea
by Anthony Valentine

Shea is a story about race and social inequalities that plague America. It is a narrative that prompts the question, “Do you know what it’s like to wake up in new skin?”

Artwork The Declaration of Human Rights
by Andres Chaparro

Through my artwork I strive to create an example of ideas that reflect my desire to raise social consciousness, and cultural awareness. Jazz music is the catalyst to all my work, and plays a major influence in each piece of work.”

Artwork ‘A thing of beauty. Destroy it forever’
by Richard DiCarlo | Derby

During times like these it’s often fun to revisit something familiar and approach things with a different slant. I have been taking some Pop culture and Art masterpieces and applying the vintage 1960’s and 70’s classic figures (Fisher Price, little people) to the make an amusing pieces. Here is my homage to Fisher -Price, Yellow […]

Twitter Feed
A Twitter List by CTMirror

Engage

  • Reflections Tickets & Sponsorships
  • Events
  • Donate
  • Newsletter Sign-Up
  • Submit to Viewpoints
  • Submit to ArtPoints
  • Economic Indicator Dashboard
  • Speaking Engagements
  • Commenting Guidelines
  • Legal Notices
  • Contact Us

About

  • About CT Mirror
  • Announcements
  • Board
  • Staff
  • Sponsors and Funders
  • Donors
  • Friends of CT Mirror
  • History
  • Financial
  • Policies
  • Strategic Plan

Opportunity

  • Advertising and Sponsorship
  • Speaking Engagements
  • Use of Photography
  • Work for Us

Go Deeper

  • Steady Habits Podcast
  • Economic Indicator Dashboard
  • Five Things

The Connecticut News Project, Inc. 1049 Asylum Avenue, Hartford, CT 06105. Phone: 860-218-6380

© Copyright 2021, The Connecticut News Project. All Rights Reserved. Website by Web Publisher PRO