House of Cards: New Tax Based on False Premises

Issues & Policies

The Labor Committee last week approved a new penalty tax on hundreds of large and small businesses in Connecticut, based on several wayward arguments.  

HB 6791 imposes a tax of $1 per hour worked by every employee making less than $15 per hour in businesses with at least 250 employees, or franchisors whose local franchisees collectively employee 250 employees. 

Proponents say that those employers are costing state tax dollars by failing to pay their employees high wages and therefore pushing them onto expensive state services.

However, even a casual look refutes that argument and reveals lots of other flaws in the proposal. 

Myth: HB 6791 only impacts big corporations.

Fact: Just the opposite. While it may seem the tax only hits big corporations, most franchise agreements require local franchise owners to pay local taxes. So your favorite local franchise will be paying the penalty despite having nowhere near 250 employees. Or, you will be paying the tax in higher prices.

Myth: HB 6791 is needed because those making less than $15 per hour are all receiving state services. 

Fact: First, this only takes into account an employee's wages and completely ignores any nonwage benefits (healthcare, time off, etc.). So, they’re really making considerably more than their hourly rate. Second, labor data shows that many people working for less than $15 an hour are teens living at home with their parents, retirees, or individuals working a second job to supplement a more substantial income. Why penalize job creators for employing people who are clearly not receiving any state services at all? 

Myth: Revenue from the penalty tax will directly help those relying on state services.

Fact:  The harsh reality is the state will put the funds into overall General Fund to cover any kind of state expenditures—not to support the services these employees allegedly use. Nothing will go to the people working for less than $15 per hour. But they are the ones most likely to have their hours cut, or job opportunities stymied to make up for the higher business costs as a result of the punitive tax. 

Myth: Big corporations will have to pay their share.  

Fact: Actually, if passed HB 6791 will give employers another reason to expand elsewhere, taking jobs and employee advancement opportunities with them. These “big corporations” are job creators that play huge roles in their communities. Not only do they provide entry-level job opportunities and training to unskilled workers, but they also invest heavily in their local communities. They sponsor youth sports teams, donate to schools, clean up public spaces, provide scholarships, and a host of other philanthropic activities. They are not who HB 6791 paints them to be. 

Bottom line: HB 6791 is bad for Connecticut jobs and job creators. At a time when other states are working hard to encourage business growth, Connecticut is attempting to punish the very businesses providing opportunities in the state. 

For more information, contact CBIA’s Eric Gjede at 860.244.1931 | | @egjede


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