Republican gubernatorial candidate David Stemerman wants to cut Connecticut’s taxes, improve its school systems, and repair its transportation infrastructure, and he’s looking for inspiration to one of the most liberal states in the union: Massachusetts.
Stemerman, a Greenwich resident and former hedge fund manager, revealed that Bay State influence on his conservative campaign’s plans for Connecticut during a roundtable conversation with a dozen New Haven business leaders on Wednesday.
The event was held in one of the sleek glass conference rooms at the DISTRICT, an old CT Transit facility-turned-tech and entrepreneur incubator located at 470 James St.
Stemerman, 49, bills himself as a political outsider with business experience. He cited Michigan Governor Rick Snyder and Florida Governor Rick Scott as role models who built their fortunes in the private sector, brought a businessman’s eye to state politics, and have cut taxes in pursuit of spurring economic growth in their respective states.
But he also cited Massachusetts’ recent cuts to its income tax rate and its stricter accountability around school standards as examples for Connecticut on how to keep college graduates in the state and how to keep the next General Electric or Alexion from relocating to Boston. (While a liberal state, Massachusetts has a Republican governor.)
Stemerman earned his own millions as the founder and manager of Conatus Capital, an investment firm he launched in 2008 and sold this past December as he firmed up his commitment to run for governor.
He didn’t participate in last weekend’s Republican Party state nominating convention at Foxwoods, at which the state party endorsed Danbury Mayor Mark Boughton for governor and State Sen. Joe Markley for lieutenant governor. Stemerman instead said he plans to petition his way onto the primary ballot in August. He’s already invested upwards of $2 million of his own wealth to fund his campaign.
“Connecticut needs a political outside with business experience and independence and a willingness to say what really needs to get done,” he said.
During Wednesday’s roundtable, Stemerman gathered a diverse array of New Haven businesspeople to listen to their own concerns with the state’s economy.
“People are upset,” Stemerman said about what he has heard as he’s traveled the state, talking about the economy. “There’s a sense that something’s wrong here. Something seems unfair.”
Nearly everyone in the room agreed.
Clarence Jackson, a local wealth advisor at Morgan Stanley, said he talks to individuals and business owners every day, and hears again and again about their struggles to pay taxes. Alexis Edwards, the 24-year-old owner of Sparkle and Shine Cleaning Company, said that current state business taxes are an impediment to her company’s growth.
Robert Reed, the president of Transition Integrated Resources, which prepares military veterans to reenter the private sector, said he was worried about cuts to the state Veterans Affairs department’s budget that have outweighed investment in veteran reintegration services. Jeff Klaus, the regional president of Webster Bank, said the state economy is flatlining, Connecticut is already in a recession, and its public education system is broken.
“Connecticut is number one in something,” Klaus said, “and, unfortunately, it’s the achievement gap.”
In response, Stemerman said he plans to rebuild the state’s transportation infrastructure, fix its education system, and lower barriers to opening and running businesses in Connecticut. His answer, he said, hinged upon a restructuring of the tax code.
“We have to have lower taxes and our regulations need to be less burdensome,” he said.
He said he plans to reduce the number of state income tax brackets from seven to three. He said he plans to lower the income tax rate for individuals making between $10,000 and $100,000 from a high of 5.50 percent to 4.00 percent. He also plans to lower incomes taxes for individuals making over $100,000 from a high of 6.99 percent to 5.00 percent. People making less than $10,000 will pay 0 percent in income taxes, as opposed to 3.00 percent, under Stemerman’s plans.
Stemerman said he also plans to eliminate the estate tax, which ranges from 7.2 percent for estates over $2 million to 12 percent for estates over $10.1 million, as well as the corporate entity tax, which charges businesses $250 every two years.
“When you start a business,” he said, “you shouldn’t immediately have to start paying taxes.”
Stemerman said the aggregate cost of these tax cuts will be around $3 billion. His plan to make up for this loss of state revenue, he said, is to “economize, prioritize, and privatize.” That means using public-private partnerships to repair transportation infrastructure, privatizing mental health services, and using zero-based budgeting to eliminate all duplicative or non-essential government services. He said he plans to follow many of the recommendations of the state’s Commission on Fiscal Stability and Economic Growth, which released a report in March calling for lower income taxes and a $1 billion cut to general operating expenses.
Klaus said Stemerman’s plans to lower taxes sound all well and good, but that companies like GE and Alexion didn’t leave Connecticut because of the current tax rates. They left because of future tax rates, which hinge upon Connecticut having upwards of $100 billion in debt from public pensions and healthcare.
“Our per capita debt load has to come down,” Klaus said, “or we’re going to have to build a wall to keep people in the state.”
Stemerman said that he plans on created an independent locked trust, managed by the private sector, to essentially buy out existing employees, retirees and dependents from their benefits packages. He said that “a miserable set of conversations” will have to take place all over the state, but that he is confident that state employees will work with his administration to help reduce the state’s debt load.
He also said that lower income taxes will work to keep individuals and businesses in the state. He said Massachusetts, which he grew up in and used to refer to as “Taxachusetts,” lowered its personal income tax rate to a flat 5.10 percent in 2016 to compete with New Hampshire’s 5 percent tax rate. He said that decrease has been successful in retaining people and businesses in Connecticut.
“Can we do 5 percent in this area?” Stemerman asked. “You bet we can.”
David Salinas, the founder of the DISTRICT and the former CEO of Digital Surgeons, said that Stemerman was telling only part of the story when he said that General Electric left Connecticut because of high taxes.
“GE is dying as a company,” he said. “And it’s not because of taxes. It’s because of innovation. The company’s been in decline for years.”
Stemerman countered that his conversations with former GE employees informed him that the “fact pattern of what led them to leave the state was taxes.”
But, he agreed, that was only one of the reason. He said that GE also left for Boston because that city has better public transit and a greater pool of engineering talent.
Reed asked him about legalizing and taxing marijuana, and the development of a casino industry in the state.
Stemerman said he was astonished that the state is so desperate for cash that it is considering legalizing marijuana as a source of boosting revenue. He said that legalizing marijuana should be a public health and public safety consideration, and that, from those perspectives, he is against it. “It’s that kind of a personal thing for me,” he said.
As for gaming, he was more open to developing that in the state, so long as casinos embody more than just places to gamble, but also venues for restaurants and entertainment.
“What I care about is what works,” he said. “These are not Democratic ideas. They’re not Republican ideas.”
After the meeting, Edwards said she loved Stemerman’s passion and commitment to lowering taxes for businesses. Jackson said he hopes to see him follow through on his commitment to improving public infrastructure.
Salinas said he hasn’t decided yet on who, he is going to vote for, though he thought Stemerman did a good job of getting across the main points of his agenda.
However, he said, he wasn’t convinced that cutting taxes is the only or even the best way to attract new businesses to the state.
“I’m looking at innovation,” he said. “I’m looking at technology talent. The cost of Silicon Valley is so high, and yet they’re so dominant.” He said there are over 2,000 software engineering jobs currently open in the state, and that no one has filled them because the state lacks the necessary talent, education, and training. Whoever fixes that problem, he said, may just get his vote.