In olden days, farming communities in crisis would sometimes make bad times worse by "eating their seed corn," the seeds that they needed to plant to ensure future crops and success for future generations.
The revenue package attached to the new budget proposal makes the same mistake. On the cusp of real economic growth, it devastates the exact tools we have incorporated into our tax system over decades to ensure that Connecticut has "seed corn."
In business, that seed corn is research and development and its progeny, innovation. Our innovation has allowed firms to remain and grow in Connecticut despite high costs. It's the muscle and sinew of our manufacturing success. It's the essential elements, combined with the ability to carry forward losses in our bioscience industries.
CBIA surveys show that in any given year, between 50% and 75% of businesses develop new products or services from R&D efforts. These products can be priced at a premium for a while and are not commoditized. When Connecticut firms try to sell only commodity products, they get clobbered by lower-cost southern and overseas competition. So R&D is essential to Connecticut firms' survival and existence in our state.
Our most recent CBIA quarterly credit and economic survey shows that businesses still do care about state taxes. Eighty-eight percent of respondents said that state tax considerations are very important in their decisions concerning investment and company location.
Slashing the net operating loss carry-forward may not mean much at first to many policymakers. But what it does is say to a bioscience company that the multiyear risks you take in developing new drugs or biological treatment will not be rewarded; in the end, your return on investment is seriously compromised. It tells many industries, like bioscience, to go next door to Massachusetts for a better bargain. It tells manufacturers to try New York for a better deal.
How do we maintain, let alone grow, our job recovery in Connecticut when the messages we're sending businesses are crystal clear: Go elsewhere. Don't plan on any kind of tax predictability from our state. We're going to keep changing the rules, to your detriment.