(Adds email from GE chief executive, statement from Aetna)
By Edward Krudy
NEW YORK, June 4 (Reuters) - General Electric Co has assembled an "exploratory team" to look at moving its headquarters out of Connecticut after lawmakers passed a budget that includes $1.2 billion in tax increases despite protests from some of the state's biggest corporations.
In an email sent on Thursday to GE's Connecticut employees and obtained by Reuters, Chief Executive Jeff Immelt said he had asked the team to examine the company's options to relocate the headquarters to a state with a "more pro-business environment." GE has 5,700 employees in Connecticut.
Lawmakers passed a $40 billion biannual budget late on Wednesday. GE, Aetna Inc and Travelers Cos Inc as well as the state's Republicans slammed the measures, which extend a 20 percent surcharge on corporate tax and introduce a tax on group-wide income even if it originates out of state.
GE and Aetna, which also has a corporate headquarters in the state, said on Monday they would consider leaving Connecticut, but Immelt's email is the first sign a major corporation is taking concrete steps that could lead to it quitting the state.
The loss of GE would be a huge blow to Connecticut, which bled thousands of jobs after the financial crisis and has been one of the slowest states to recover from the recession.
The state's economy grew just 0.9 percent in 2013, compared with 2.2 percent for the United States as a whole, while job growth has also lagged.
"If this budget would wind up driving employers out of state, it would be even harder to fund the services that this budget is intended to fund," said Jared Walczak at the Washington-based Tax Foundation.
Walczak said the budget would increase business taxes by around $500 million over two years.
Democratic Governor Dannel Malloy had trumpeted the budget as an "historic investment" in roads, bridges, rail and other infrastructure slated to reach $10 billion over five years.
Facing the growing backlash on Thursday, a spokesman for his office said: "We have spoken with GE in recent days and have been kept apprised of their thinking."
Separately, Aetna issued another statement on Thursday saying its annual $65 million state tax bill would jump 27 percent once all the budget measures were implemented.
"Elected leaders have failed to address the state's budget obligation responsibly," Aetna said. "But it's Connecticut's businesses and residents that will pay the price."
The state also increased a tax on data processing that Aetna said would "hurt our ability to remain competitive and invest in our employees and customers."
The extension of the temporary 20 percent surcharge maintains Connecticut's effective corporate tax rate at 9 percent, compared with a base rate of 7.5 percent, the fifth-highest in the nation, according to the Tax Foundation.
The budget also raises the top rate of income tax to 6.99 percent from 6.7 percent, cuts property tax credits and boosts the sales tax on luxury items to 7.75 percent from 7 percent. That includes automobiles over $50,000, jewelry over $5,000, and clothing and accessories over $1,000.
(Reporting by Edward Krudy and Lewis Krauskopf; Editing by Lisa Von Ahn and Alan Crosby)