We’ve discussed this project before, but what the heck, it provides a good insight into where the luxury market is going: downtown and downsized.
Which makes sense: the Conyers farm pioneers and other back country residents built huge homes to accommodate their large families and staff, and now that the children have grown, who needs 15,000 sq. feet to heat, and a $1 million-a-year maintenance budget? So they’re moving.
What is surprising, perhaps, is that new young families aren’t moving north to replace them. The preference now seems to be for smaller lots and close, or closer to town locations. That’s not good news for downsizes hoping to sell the big house before moving; either they’re going to have to take a hit, or stay put.
Another depressing trend for those owners is that the wealthy types who might have constituted a market for their homes are, according to Investors’ Business Daily, moving out of state.
You may remember a 2014 Gallup poll that had Connecticut as the new Dodge City, the place that half the residents wanted to get out of. Well, many are leaving, eroding the tax base. And the next may be Jeffrey Immelt, CEO of General Electric.
Companies and people are leaving the state because taxes have been jacked up steeply in recent years under the one-party rule of Democrats. Further hikes are inevitable, given looming budget deficits, driven primarily by escalating annual contributions to the state’s overgenerous and seriously underfunded public-sector employee pension fund and unfunded health care obligations.
The Yankee Institute, a policy think tank in Hartford, just published “$60 a Second,” a study documenting a $3.8 billion erosion in the individual income tax base from 2011 to 2013 as emigrants took more out of the state than immigrants brought in.
Connecticut is about 50% more reliant on high earners than the nation as a whole. Residents with annual adjusted gross income in excess of $2 million contribute 25% of the state’s total individual income-tax revenue, in contrast to only 17% of total federal individual income-tax revenue.
The higher earners are departing. Connecticut is the only state where the adjusted gross income of emigrants exceeds the AGI of remaining residents.
Between 2011 and 2013, about 95,000 taxpayers left the state. Their average AGI was $112,000, versus $101,000 for the remaining 1.4 million taxpayers. Only 78,000 taxpayers moved into the state, bringing an average AGI of only $86,000. Data are not yet available for 2014.
The outlook is dire. Connecticut’s budget is about $18 billion. Just four months into this fiscal year, it fell into a deficit, requiring a special legislative session to adopt $350 million in short-term fixes.
It’s getting worse, with projected deficits of $550 million and $1.7 billion in the next two fiscal years. Even wider gaps lie beyond, as official estimates of annual employee pension fund contributions escalate from $1.5 billion today to twice that amount by 2025 and quadruple by 2032. That doesn’t include retiree health care benefits.
[T]he death spiral of increasing taxes and increasing flight will continue. With its heavy reliance upon mobile high earners, Connecticut is especially vulnerable, but other states are at risk too. Connecticut is the canary in the coal mine.
Why do voters in this state continue to keep Democrats in power? Because, like every bubble before them, from the Dutch Tulip Bulb craze in the 1630s to the .com frenzy, no one wants to believe that the music will end. But it does; as Herbert Spenser observed, “when something can’t continue, it won’t.”
Extraordinary popular delusions and the madness of crowds.