Lawmakers Trim Business Tax Hikes in $40.3 Billion Budget
In a special session this week to adopt a bill to implement the $40.3 billion budget, state lawmakers trimmed business tax hikes by a reported $152 million, reducing the overall impact on taxpayers to an increase of $1.859 billion (OFA, total for “all appropriated funds tax changes”).
Debate over the potential impact of tax hikes on jobs in Connecticut helped convince lawmakers to trim the increases, and could refocus the legislature’s efforts on strengthening the state’s competitiveness.
“The budget debate, particularly over the last month, served an important purpose,” said Joe Brennan, CBIA president and CEO.
“It put a spotlight on Connecticut’s economy and the ability of companies to compete in regional, national, and global markets.”
As originally adopted by the legislature on June 3, the budget and tax package severely hurt companies’ ability to compete.
Reopening the budget and modifying the tax increases, said Brennan, has “begun undoing some of the damage.”
Revisions to the state budget will begin to put Connecticut on a better economic path–if lawmakers continue focusing on economic competitiveness.
Policymakers, said Brennan, “can’t stop now.”
“Make no mistake about it, taken as a whole, this budget does not help Connecticut’s overall competitiveness,” Brennan said.
Brennan thanked Governor Malloy and the General Assembly, however, “for responding to the concerns voiced by businesses and their workforces.”
Republican lawmakers and the Democrats who voted against the original budget also deserve credit “because their concerns gave added weight to the call to find a better way.”
Votes on the budget implementer were close in both legislative chambers, with two Democrats each in the House and Senate voting with Republicans against the bill.
The final House approval was 78-65, and in the Senate, the vote was 19-17 in favor.
Among other things, the new budget:
- Reduces the value of corporate tax credits from 70% to 50%
- Reduces the use of net loss carryforward (NOL) to 50% of net income in any income year
- Institutes mandatory combined reporting—starting in 2016
- Extends the corporate tax surcharge for at least another two years
- Increases the personal income tax on high wage earners
However, lawmakers kept the sales tax on computer and data processing services at 1%, instead of a planned increase to 2% in 2016 and to 3% in 2017.
Break the cycle
What’s more, the budget reinterprets the state’s constitutional spending cap to allow increases of 4.05% in the first year and 3.19% in the second.
And even as this budget attempts to close a projected $3 billion budget deficit for the new biennium, the state is looking at another deficit, of about $830 million, in three years, says the legislature’s nonpartisan Office of Fiscal Analysis.
Policymakers need to break that cycle of tax hikes and budget deficits by aggressively pursuing structural reforms to more efficiently deliver services, reduce long-term costs, and stabilize the state’s economy to benefit everyone who lives in Connecticut.
Perhaps to start that effort, lawmakers called for new actions to help develop policies promoting fiscal responsibility and economic growth.
The budget implementer directs the governor’s budget secretary to look at the recommendations of the Connecticut Institute for the 21st Century in making state government work more efficiently, effectively, and affordably.
A report to the legislature is due by Feb. 1, 2016.
In addition, lawmakers created a state commission specifically to help develop policies promoting Connecticut’s economic growth.
“Although there is always a certain amount of skepticism when it comes to creating new legislative commissions,” Brennan said, “we hope that having an additional voice speaking to the critical importance of keeping Connecticut competitive will drive better policy choices.”
CBIA has continually emphasized that policies encouraging economic growth also provide the resources needed to take care of Connecticut’s citizens—it’s not an either/or proposition.
Connecticut employers of all sizes and types—and the people who work for them—want the state to be a better place to live, work, learn, and raise a family.
For more information, contact CBIA’s Bonnie Stewart at 860.944.8788 | firstname.lastname@example.org | @CBIAbonnie or Louise DiCocco at 203.589.6515 | email@example.com.
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