State spending & State taxes

State spending

(Jan. 9, 2008) Jobs and the economy are top concerns of people in Connecticut. Policymakers can address those concerns with a state budget designed to foster economic development, provide the tools needed to improve aging infrastructure, reduce local property-tax pressure, develop skilled workers and provide more affordable housing.

Recommendations:

• Ensure that revisions to the second year of the biennial state budget adhere to the constitutional spending cap.
• Control state spending by making greater use of performance-based budgeting, starting with the costliest, most expansive programs, and requiring improvements in productivity, efficiency and effectiveness in all state operations.
• Plan for potential cutbacks in federal aid resulting from the national budget deficit and growing obligations for Social Security, Medicare and Medicaid.
• Develop strategies to use the state budget to promote economic growth, including by:
• Speeding up state investments in multiple modes of transportation to reduce congestion.
• Controlling state spending to allow phasing out the property tax on manufacturing machinery and equipment.
• Increasing incentives for college graduates to stay, live and work in Connecticut, especially those qualified for high-demand technical fields such as the biosciences and engineering.
• Increasing the supply of housing affordable for workers in Connecticut.
  • Create a plan to reduce the state's unfunded liabilities for public-employee retirement costs, including health care benefits, and help municipalities do the same.
  • Reduce unfunded municipal mandates.

State taxes

Tax policy has a significant effect on economic development, and Connecticut needs to enable businesses in the state to compete in a global economy. With a current business tax climate ranking of 38th in the U.S., Connecticut needs to do more to become a more attractive place for business investment.

Recommendations

Reverse the erosion of taxpayers' privacy, administrative and judicial rights and remedies by:

• Complying with the Taxpayers' Bill of Rights.
• Returning the standard of proof to a "preponderance of the evidence" in tax cases where there is no allegation of fraud.
• Requiring the Department of Revenue Services to send the original or a copy of a billing notice and a determination/disallowance letter to a representative under a power of attorney.
• Clarifying the application of the "intent to evade" provisions of Title XII.

• Promote business and economic growth through tax policies that encourage, not discourage, business investment in technology, innovation and productivity. Specifically:

  Eliminate the 70% cap on corporate income tax credits.

  Accelerate the phaseout of the personal property tax on manufacturing machinery and equipment.

  Allow all business entities to claim and/or pass through tax credits.

• Repeal the sales tax on business analysis and management services.
• Reject efforts to make Connecticut's business taxes more onerous
• Reject efforts to shift more of the property tax burden to businesses.
• Modernize and rationalize manufacturing sales tax exemptions to make Connecticut businesses more competitive.
• Reject efforts to increase state personal income tax rates, which would hurt small and family-owned businesses; repeal the business entity tax.