A proposed new tax on Connecticut businesses intended to fund state Department of Labor salaries failed to advance out of a legislative committee this week.

The tax was tucked inside SB 6, one of bills implementing the governor's proposed spending revisions for the 2018-2019 fiscal year.

The Appropriations Committee did not act on that bill by its April 5 reporting deadline.

However, as both Appropriations and the legislature's Finance, Revenue, and Bonding Committee failed to reach agreement on overall budget revisions, concerns remain that the tax could resurface later in the session.

DOL sought the tax to pay its staff, the highest-paid of any state labor department in the nation.
DOL sought a .05% levy on all taxable wages to meet its payroll obligations. The agency acknowledged that its staff is the highest-paid of any state labor department in the nation.

The proposed tax—which would have generated about $9 million next fiscal year—generated widespread concerns among the business community, garnering national media attention.

Retirement Mandate Borrowing Plan

SB 6 also authorized the state to borrow up to $1 million to hire an executive director and pay the legal expenses needed to create the state's troubled retirement plan mandate.

The costly, burdensome mandate requires businesses with five or more employees to enroll any full- or part-time employee not eligible to participate in an employer-sponsored plan into a retirement savings plan.

Allowing the Connecticut Retirement Security Board to borrow essentially uses taxpayer dollars to help the state get into the retirement business and push existing private sector businesses out of the market.

As with the employer payroll tax, the borrowing provision could also resurface in later budget proposals.

Tax Targeting Large Employers Fails

A bill taxing any business with 500 or more employees, or any franchisor whose franchisees collectively have 500 employees, that pays employees less than $15 per hour also died when the Finance Committee failed to act on it.

CBIA's Eric Gjede told the committee such a tax would undermine businesses from hiring and providing opportunities for some of Connecticut's least-skilled workers.

"Employers across the country look at legislation like this and make the choice to grow their businesses elsewhere," Gjede said.

"In fact, one media outlet characterized a nearly identical bill from the 2015 session as 'Connecticut's novel way to kill jobs.'"


For more information, contact CBIA's Eric Gjede (860.480.1784) | @egjede