Tax Credits Being Eyed to Spur Economy, Job Growth
Lawmakers are looking at tax policy changes to help stir job growth and spur Connecticut’s recovering economy. The Commerce and Legislative Program Review and Investigations committees are proposing legislation designed specifically to help small businesses grow by allowing them to take advantage of a certain job tax credit and create an angel investor tax credit.
At the same time, both committees have measures to eliminate “underutilized” tax credits and implement a type of review process that could be quite harmful. There’s a lot of talk in the legislature about reviewing all business tax credits for their effectiveness.
While that’s a big improvement over previous attempts to simply eliminate broad swaths of tax credits, lawmakers must be careful in defining what “effective” truly means, and the process must be one that allows for predictability and certainty so companies can keep Connecticut in their future.
Strategic tax credits
Tax credits encourage certain business activities considered valuable to the state—such as fostering new businesses, strengthening our economic base industries, encouraging investment in Connecticut facilities and operations as well as creating new jobs.
In fact, credits have catalyzed the kind of business activity that produces millions of dollars in tax revenue for the state every year. And tax credits help offset Connecticut’s high business costs for wages, health care benefits, and energy.
Just as having good tax policy opens the door to economic growth, its absence can close that door. In recent years, proposed legislation would have seriously cut back or eliminated the use of business tax credits in Connecticut.
This year, some lawmakers are proposing that the state review all business tax credits. There’s nothing wrong with that as long as policymakers see the big picture.
Tax credits are effective for capital investment, research and development, job retention and creation, as well as investment in urban areas, among others. R & D tax credits, for example, have been instrumental in the growth of Connecticut’s bioscience industry. Tax credits also can make the difference between a company staying in Connecticut or moving out.
In addition, businesses can’t take advantage of Connecticut tax credits unless they stay in the state and engage in whatever activity the credits are designed to produce.
Consistency and predictability make tax policy work. Efforts to suspend, roll back or eliminate tax credits—or just threatening to do that—undermine business confidence and really don’t encourage new businesses to expand to or try to grow roots here.
Reviewing how state government does business is always a good idea, but lawmakers should understand the big picture of the value—and necessity—of good tax policy which requires consistency and predictability.
For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 or firstname.lastname@example.org.
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