Survey Finds Tax Policy Critical Investment Factor
Almost 90% of Connecticut business leaders say state tax policies are important factors for making investment and location decisions according to the CBIA/Farmington Bank 4th Quarter Economic and Credit Availability Survey.
Nearly two-thirds (61%) of survey respondents said tax policy was very important in their decision-making. Another 27% said it was somewhat important.
“Our economic recovery and growth is threatened when business doesn’t feel confident,” said CBIA economist Pete Gioia.
“This question proves the necessity and urgency behind correcting the currently proposed budget.”
State lawmakers are reviewing Governor Malloy’s proposed $40 billion, two-year budget, a proposal that significantly reduces vital investment incentives, cancels previously scheduled tax reductions, and indefinitely extends the corporate tax surcharge.
Budget’s $496 million tax impact
Of the $900 million in proposed revenue increases over two years, businesses will be hit with well more than half–$496 million–and that’s after the elimination of the business entity tax is taken into consideration.
Over the past several years the state has worked hard to attract and keep manufacturers, biopharmaceutical companies, and financial services firms, and other job creators.
The proposals that increase costs on job creators would:
- Reduce the value of investment incentives for research and development, capital purchases, and other key economic drivers
- Reduce the net operating loss carry-forward, an important tax mechanism to encourage investment and entrepreneurial activity in Connecticut
- Continue indefinitely the 20% corporate tax surcharge that was scheduled to be eliminated this year
- Continue the credit reduction for the insurance tax that was scheduled to be eliminated this year
- Increase numerous fees paid by businesses
The survey also found that credit conditions showed slight improvement over the previous quarter. Thirty percent of businesses characterize the lending climate as good or excellent, 50% call it average, 16% consider it fair, and 5% say it’s poor.
Credit expectations unchanged
Expectations for the next three months remain unchanged: 29% believe Connecticut’s lending climate will improve, 21% anticipate a decline, and half expect things to stay the same.
“With a stable, vibrant economy within our reach, we want state businesses to know that banks are ready to help them invest and grow in Connecticut,” said John Patrick, Jr., CEO and president of Farmington Bank.
Other key findings:
- 39% of businesses surveyed expect their company performance to improve, up four percentage points over the previous quarter (35%).
- Fewer businesses in the fourth quarter expected their performance to erode (12%) compared to the previous quarter (18%).
- Similarly, expectations for growing their workforce were more optimistic in the fourth quarter (28% of companies anticipating some improvement, versus 25% in the third quarter).
- Nearly half of the companies surveyed (48%) expect conditions for their firm to remain stable, and 62% expect their workforce to remain stable.
CBIA/Farmington Bank 4th Quarter Economic and Credit Availability Survey was emailed to 1,800 Connecticut business leaders in January 2015. A total of 231 responded, for a 12.8% response rate and a margin of error of 6.5%.
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