Property tax bill will help
state’s manufacturers,
economy

(March 14, 2006) Lawmakers can go far to improve Connecticut’s business climate and boost the competitiveness of manufacturers in the state by approving SB-348, which would exempt manufacturing machinery and equipment from local property taxes.

CBIA, on behalf of more than 100 state business associations under the banner of the Coalition for a Competitive Connecticut, testified before the Commerce Committee in support of the bill.

“Manufacturers are under tremendous pressure in Connecticut,” said Bonnie Stewart, CBIA’s vice president of government affairs. “Competing against companies with much lower costs of doing business in a truly global economy is getting tougher all the time, putting jobs at risk.”

Most manufacturers, particularly small and midsize ones, say they can’t adequately compete unless they are able to invest in the best, most current technology to make them more productive than their competitors.

The state’s property tax on machinery and equipment hurts manufactures’ ability to gain that competitive edge. Worse, neither Massachusetts, Rhode Island, New York, New Jersey nor Pennsylvania impose the tax.

Also testifying before the committee was Paul Hoffman, owner and president of Orange Research Inc., a Milford manufacturer and CBIA member. He reminded the legislators that “It is the numerous small manufacturing businesses like my own that provide Connecticut with the tax base it needs.”

Legislative leaders, CBIA and the state’s business community have all identified this as one of the most important tax reforms needed to boost the state’s manufacturers.

In written testimony, Senate President Pro Tem Donald Williams Jr. (D-Brooklyn), said, “This tax not only puts Connecticut manufacturers at a competitive disadvantage, it acts as a disincentive as they consider purchasing new equipment that improves productivity and adds jobs.”

While the legislature approved a property tax exemption for machinery and equipment in 1990, it applies only to the first five years after acquisition of the property. Competitive pressures on manufacturers have greatly increased since 1990, and more must be done to safeguard manufacturing in the state.

Manufacturers are not seeking any type of special program or handout from state government but want a tax policy that is more in line with those of our competitor states.

If the outright elimination of the tax can’t be accomplished this legislative session, CBIA encouraged legislators to phase it out in three steps:
1. Eliminate the property tax on all newly acquired machinery and equipment purchased on or after July 1, 2006.
2. Continue the existing program for any machinery and equipment purchased prior to July 1, 2006 at the current rate.
3. Set a statutory depreciation schedule for machinery and equipment purchased prior to July 1, 2006, that no longer qualifies for the PILOT program. (The depreciation schedule would be phased out as shown in the table below.)

Connecticut needs tax policies that encourage investments in new equipment and technology and that foster innovation and productivity. These investments in turn will lead to the development of new products and services — and will help the state bring in other businesses and jobs.

For more information, contact CBIA’s Bonnie Stewart at 860-244-1900 or stewartb@cbia.com.

Possible depreciation schedule

Suggested statutory depreciation schedule for machinery and equipment purchased prior to July 1, 2006, that no longer qualifies for the PILOT program.