The former haven for wealthy New York hedge fund managers on verge of collapse as Connecticut prepares for bankruptcy
For a long time now the state of Connecticut has acted as the ‘suburbs’ for wealthy New Yorkers who sought to live in the much friendlier tax haven just a few hours outside of Wall Street. Â But as the state began to impose new sliding tax schemes on the rich, and the boom of the past decade has begun to recede for many of these hedge fund managers, Connecticut is no longer thriving as the safe haven it once was to the wealthy living in the Northeast.
And because of the growing migration of the rich over the past few years to states with much more equitable tax laws, not only has Connecticut seen a huge drop in state revenues, but it has become so bad that they are on the brink of contemplating bankruptcy proceedings.
Image courtesy of How Money Walks
The state of Connecticut has been hit hard by the double whammy of a deteriorating local economy, coupled with a plunge in hedge fund profits – as well as hedge fund managers permanently relocating to Florida – leading to a collapse in tax revenues. According to the the latest Connecticut budget released last week, the state is reeling from the consequences of sliding tax revenue from the super-rich, i.e. the state’s hedge fund managers. The latest figures showed thatÂ tax revenue from the stateâ€™s top 100 highest-paying taxpayers declined 45% from 2015 to 2016.Â The drop adds up to a $200 million revenue loss for Connecticut.
According toÂ AP, lawmakers and the governor have already discussed the possibility of making deep cuts throughout state government, including to state colleges and universities and social services. Meanwhile, thereâ€™s a threat of about 4,000 layoffs if a $700 million labor concession deal isnâ€™t reached with state employees. Lawmakers say these latest revenue figures make that agreement even more crucial.
Meanwhile, in a stark confirmation just how dire the state’s economic and fiscal situation has rapidly become, theÂ Hartford Courant reportsÂ that city leaders in the state’s capital have taken a step toward bankruptcy, soliciting proposals from law firms that specialize in Chapter 9. It adds that the city is reviewing several firms and could hire an attorney as early as this week, sources with knowledge of the plans said.
Facing a $65 million deficit next year and a $14 million shortfall this year, Mayor Luke Bronin has hinted for months that Hartford could file for bankruptcy, and said during his budget release in April that he was “not in a position to rule anything out.”Â Bronin proposed cuts and concessions from the unions, but is still seeking $40 million in additional state aid to close next year’s budget gap. The city resorted to short-term borrowing to cover costs such as payroll payments this year. – Zerohedge
As opposed to the common American worker, the wealthy have always had options when states feel the compulsion to impose new draconian laws upon their citizens, especially in the realm of taxes or regulations. Â And judging by the recent moves from states to pass increased taxes on gasoline sales as well as on beverages containing any trace of sugar, it should not be surprising that the ultra rich would be fine with moving to states that afford them better economic perks, as well as being run by more conservative governors.
Kenneth Schortgen JrÂ isÂ a writer for The Daily Economist, Secretsofthefed.com,Â Roguemoney.net, and Viral Liberty, and hostsÂ the popular youtube podcast on Mondays, Wednesdays and Fridays.Â Ken can alsoÂ be heard Wednesday afternoons giving an weekly economic report on theÂ Angel Clark radio show.