Sen. Boucher to CT Budget Chief: “Blaming Wall St. just doesn’t work.” (Hartford Courant)

November 19, 2015

Loss of High-Paying Jobs Hurts State Income Tax / Hartford Courant

With huge losses in high-paying jobs at investment giants like UBS and Royal Bank of Scotland in Stamford, the state is facing blows in income-tax collections as high-end jobs have left the state.

Legislators discussed that issue Wednesday as two major financial committees joined together to analyze the state’s $254 million deficit in the current fiscal year and projections for even larger deficits in the next four years.

A key problem is that the state is collecting less than expected in the state income tax, even though the national economy has been in recovery since 2009 and the unemployment rate has been dropping steadily in Connecticut as the national economy improves.

“There’s no question I am troubled by the wage growth in Connecticut,” said Ben Barnes, Gov. Dannel P. Malloy’s budget director.

Barnes, who previously worked in Stamford when Malloy was the mayor, said that UBS “doesn’t have nearly as many” high-paid investment bankers as it did before the financial meltdown of late 2008 and early 2009 that led to a bottoming of the stock market in March 2009.

“They’ve been replaced by much smaller, boutique firms,” Barnes told legislators on the finance and appropriations committees at the Capitol complex. “Connecticut depended very heavily on them for high-wage jobs. We may not see those investment banker jobs come back for a long time.”

The state has been hit hard statewide by a reduction in the number of financial services jobs in a variety of firms, and the financial impact has been “disproportionately felt” in Connecticut, Barnes said.

Overall, the state has lost nearly 15,000 financial services jobs compared to the pre-recession total, or 10.2 percent of the sector, according to state statistics.

For years, Connecticut has relied heavily on millions of dollars in capital gains taxes that are paid largely by millionaires and billionaires, particularly in lower Fairfield County. In the boom years on Wall Street, the state has traditionally had budget surpluses. When Wall Street hits bottom, then the capital gains dry up and the budget deficit grows, officials said.

But state Sen. Toni Boucher, a Wilton Republican, said that blaming one sector of the economy is not the answer.

“Quite frankly, just blaming Wall Street just doesn’t work,” Boucher told Barnes. “Other states face the same challenges when it comes to Wall Street.”

When Boucher asked Barnes why Connecticut is not growing economically, Barnes responded, “It’s really the lack of oil reserves.”

Nationally, Barnes said, the booming states have been places like Wyoming and Montana that have far more natural resources than Connecticut.