Supply-side economics may have failed in Kansas, but it’s alive in Connecticut.

Bob Stefanowski, the Republican candidate for governor and a former top executive at General Electric Co. and UBS AG’s investment bank, is promising to revive the third-worst performing U.S. state economy with tax cuts. Lots of them.

He wants to get rid of the state’s personal-income tax over eight years, eliminating the revenue that covers almost half of Connecticut’s annual general-fund budget. He wants to lower taxes on corporations and do away with the gift and estate tax, too.

The upshot? He says wealthy residents would stop fleeing to Florida and corporations would move to Connecticut instead of out, like General Electric. A state that’s struggled to create jobs would have plenty of them, he contends. “This state is screaming for a different tax policy," Stefanowski said in a phone interview.

In the race to succeed Dannel P. Malloy, a two-term Democrat who isn’t running for reelection, the economy and taxes have emerged as the two top issues -- for good reason. While the U.S. is in the midst of the second longest expansion in history, it’s largely passed by Connecticut, whose economy has contracted every year but one since the end of the recession. The state added just 14,700 private-sector jobs since 2008. And the government is facing a $4.5 billion deficit in the next two-year budget cycle, despite income-tax increases enacted by Malloy in 2011 and 2015.

Stefanowski has said electing his Democratic opponent, Greenwich businessman Ned Lamont, will bring higher taxes and more spending. But Lamont has distanced himself from the governor, whose approval rating is just 23 percent, by criticizing his management of the budget and casting himself as a business-friendly candidate. At the same time, President Donald Trump may be creating some headwinds for Stefanowski’s campaign.

Tump’s unpopularity with Connecticut voters, particularly women, is benefiting Lamont more than Malloy’s unpopularity is harming him, according to an Oct. 10 Quinnipiac University poll. It found that Lamont had an 8 percentage-point led over his Republican rival, bolstered by a 22 percentage-point margin among women. Independent candidate Oz Griebel had 11 percent.

“You’d think this would be a slam-dunk for Republicans, but it’s not shaping up that way," said Lesley DeNardis, an associate professor of government at Sacred Heart University in Fairfield, Connecticut.

Stefanowski says internal polling shows him tied with Lamont. The Cook Political Report rates the race a tossup.

Stefanowski wants to turn back the clock before 1991, when Connecticut adopted an income tax and the spending it supports. His economic plan is co-authored by supply-side guru Arthur Laffer, who also advised former Kansas Republican Governor Sam Brownback.

Adrenaline Shot

In 2012, Brownback signed a large income-tax cut, saying it would be “like a shot of adrenaline into the heart of the economy" and pave the way to the creation of tens of thousands of new jobs.

It didn’t work out that way. The anticipated economic growth didn’t come, blowing a hole in the state budget. Kansas made deep cuts to education, borrowed to make pension payments, and siphoned off its highway funds. Kansas’s credit rating was downgraded. Four years after the experiment, Republicans in the legislature approved $1.2 billion in tax increases to balance the budget.

“People point to Kansas -- they don’t point to Tennessee, Florida, Texas," said Stefanowski. “The states that don’t have a state income tax are outperforming."

Academics who have studied the relationship between taxes and growth at the state level say that taxes are just one factor in attracting new businesses and residents. The quality of schools, the skill level of the workforce, and weather also play a role.

Connecticut, the quintessential suburban state, also lacks a thriving metropolitan center like Boston or New York City to attract young, educated workers.

Seek Concessions

Stefanowski’s tax cuts would decimate spending for education and lead to property-tax increases by local governments that would have to make up for lost state aid, Lamont has said. Connecticut’s property taxes rank in the top five among U.S. states. Some local governments are struggling, and the capital city, Hartford, was flirting with bankruptcy until it was rescued by the state.

“Bob’s tax plan would drive our economy to a dead stop," Lamont said at a Sept. 17 debate. “Eliminating $10 billion of revenues in a short period of time, guaranteed, no matter what, would just be dysfunctional."

Lamont has promised not to raise income taxes and is proposing a $300 property-tax credit in his first year and a $1,200 credit in the second. He also wants to increase spending on transportation by tolling out-of-state truckers. He said he would seek concessions from government employees to hold down costs.

Personal income taxes and corporate taxes generate more than half of state’s $18.7 billion general-fund revenue. Fixed payments like debt service, pensions, retiree healthcare and Medicaid total about $9.4 billion.

“Obviously, you want to see revenues matched to expenses in a sustainable manner," said Robert Amodeo, head of municipal bond investments at Western Asset Management. “It’s going to be a significant challenge if you’re erasing a major source of revenue."

Stefanowski has said he wouldn’t start cutting taxes immediately, focusing on spending reductions during his first two years. He said he would phase in tax cuts when revenue targets are met.

He also wants to renegotiate contracts with government employees that expire in 2027, put new employees in 401(k)-style retirement plans and reduce the state work force through attrition. Connecticut has a $71 billion unfunded pension liability according to Moody’s Investors Service, second only to Illinois as a percentage of revenue due to decades of underfunding.

Stefanowski grew up in New Haven and spent most of his career at GE, where he worked his way up to a company officer under Jack Welch and ran its corporate financial services business in Europe. He left GE in 2007 and became chairman of 3i Private Equity Group in London. In 2011 UBS hired him to restructure its investment bank after rogue trader Kweku Adoboli lost $2 billion.

“Every organization that I’ve ever worked in you can cut 5 to 10 percent of waste," Stefanowski said. “I’ve done a lot of turnarounds. The state of Connecticut is a $40 billion biennial budget. That’s a big, ugly turnaround."

This article was provided by Bloomberg News.