Tax Attack on State’s Economy
Just when Connecticut’s economy is showing signs of recovery, SB 946, the tax package approved last week by the legislature’s Finance Committee would apply the brakes.
The list of tax hikes is long and the amounts high, affecting individuals, employees and employers throughout Connecticut.
In a week when Connecticut once again finished dead-last in a national study measuring operating costs and business climate (pwc’s 2015 Aerospace Manufacturing Attractiveness Rankings), and finished 33rd overall, the tax hikes would do nothing to improve our state’s position.
Strategic tax policy can be used to generate economic growth, as has been demonstrated in Connecticut with the state’s largest and fastest growing industries.
But the taxes the Finance Committee approved in its two-year plan would scuttle that kind of policy and stymie the state’s economic growth:
- Expanding the state’s sales and use tax—roughly 45% is paid by Connecticut job creators—to most business and professional services and on many business services sold to the public; will greatly increase business costs by eliminating many exemptions, including for computer and data processing services and the worldwide web; a $732 million tax increase
- Reducing the value of tax credits—that anchor jobs, industries, and investments in the state—from 70% to 50%; increasing taxes on Connecticut job creators by $72.5 million over the biennium
- Reducing the use of net loss carryforward (NOL)—that help vulnerable start-up companies gain a foothold—to 50% of net income in any income year; a $246 million tax increase
- Instituting mandatory combined reporting—will impact Connecticut’s headquarters companies, and the state itself; $62 million tax increase
- Extending the corporate tax surcharge—falls on Connecticut’s flagship job creators—for at least another two years; a $119 million tax increase
- Increasing the personal income tax—raising the top rate from 6.7% to 6.99%; establishing a 2% supplemental tax on capital gains over certain thresholds – potentially impacting small and family businesses, for an estimated $345 million tax increase
Among other things, the proposal also extends the temporary cap on the maximum insurance premium tax liability an insurer may offset through tax credits; extends the moratorium on new claims for film production tax credits; and delays the scheduled expiration of the two lower tiers of caps on credit utilization against the tax.
Many of these tax increases will undermine the strategies state lawmakers have used to grow Connecticut’s economy—with tax policy that promotes jobs and investment in aerospace, biopharma, defense, finance, and other core industries.
It begs the question: What kind of economy does the state wants to have—one that grows exponentially from dynamic, job-creating employers—or one that’s stalled under the burden of taxes?
Any rival state looking for a competitive edge over Connecticut would be encouraged by the committee’s tax package.
Instead, Connecticut needs to promote a pro-growth economy that can naturally deliver the steady, robust revenues needed for critical state services.
CBIA urges lawmakers to stop and reject the tax increases currently being proposed and focus instead on ways to grow Connecticut’s economy.
For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 | firstname.lastname@example.org | @CBIAbonnie
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