Legislation adopting some recommendations of the Commission on Fiscal Stability and Economic Growth includes positive proposals for business.
"We support many aspects of HB 7410 and realize that addressing our challenges requires shared sacrifice," CBIA president and CEO Joe Brennan told the Finance, Revenue, and Bonding Committee April 10.
"However, we urge the full legislature to do more to cut state spending rather than relying on tax and fee increases."
State lawmakers created the commission two years ago, appointing a group of business leaders and others to address the state's budget deficit and spiraling costs, and recommend how to turn the economy around.
Commission members followed their initial findings with a second report last November in an attempt to convince legislators of the state's dire financial situation.
Improved Tax Competitiveness
Brennan noted that the Tax Foundation estimates that adoption of HB 7410 would improve Connecticut's tax competitiveness from 47th to 39th nationwide.
"And the bill achieves this without costing the state as it is revenue neutral," he said.
Among other things, HB 7410 takes steps to eliminate the state’s gift and estate tax.
Connecticut is one of only 12 states to have an estate tax and the only state that has an estate and gift tax.
"These taxes create disincentives for individuals to remain in the state, particularly in their retirement years," Brennan said.
In addition, he said those taxes create financial burdens that impact the ability of business owners to transfer their company to a family member upon retirement or death.
Capital Base Tax
The bill also aligns state tax policy for net operating loss deductions with federal tax law by allowing businesses to deduct up to 80% of their tax liability rather than the current 50% cap.
Brennan said the move "makes our tax policy more competitive with other states and allows businesses struggling with Connecticut's sluggish economy the opportunity to recover."
CBIA also supports eliminating the capital base tax, as proposed in HB 7410.
Brennan said other states have realized that the capital base tax—paid on the net worth of a business—creates a disincentive to creating wealth or assets.
"It is particularly problematic for businesses with necessarily long R&D cycles, like the biopharma industry, before products can be released for sale," he said.
Sales Tax Expansion
The bill also calls for expanding the state's sales tax base, as Gov. Ned Lamont proposed in his budget.
Brennan asked lawmakers to approach that carefully, understanding that any tax increase should be a last resort for balancing the budget.
"It's clear the state's economy has still not fully recovered from the last recession, and we must be very cautious about any additional tax increases on our businesses and residents," Brennan said.
He also noted that any expansion of the sales tax must consider the competitiveness of businesses operating near or across state lines.
And he asked lawmakers to be mindful of the impact of any tax or fee increases on small businesses, which may face higher costs due to proposals for paid family and medical leave and hiking the minimum wage.