Tax Proposals Creating Doubts about Connecticut in Business Community

Issues & Policies

Measures halt the very activities that can regrow economy

Doubt can have a very powerful impact on behavior. For example, doubts about jobs and the economy have convinced many American consumers to put the brakes on spending—which has led to even more economic stress in the nation.

Tax proposals made by the legislature’s Finance Committee (SB-932 and others) have created doubt in Connecticut’s business leaders about the state as a good place in which to keep growing and creating jobs. Some employers are now questioning Connecticut’s long-term viability as a business location.

That’s because the proposals actually put up barriers to the very investments that are key to the state’s econmic recovery.

Tax credits for research and development and investments in physical and human capital are critically important in Connecticut, and SB-932 reduces these credits—just when some other states are expanding theirs.

The bill also eliminates important sales tax exemptions for the bioscience and fuel cell industries, as well as for manufacturers and IT firms. Over the last several years, targeted exemptions have helped fuel the impressive growth in these areas of Connecticut’s economy.

Long-term uncertainty
Employers are concerned not only because SB-932 will dramatically increase their cost of doing business, but also because it creates a great deal of uncertainty about Connecticut’s long-range tax policies.

Businesses regularly plan in 10-year cycles, and they look closely at several factors that help determine their return on investment and whether a location is a good place in which to do business. The predictability of the tax system is key: Can employers depend on a stable tax code that will enable them to plan for growth in the state and, over time, see a return on their investments and create the jobs that go with them?

SB-932 creates instability, and without a stable tax policy in sight, employers are becoming doubtful. No company, for example, is going to invest significant resources in a new research facility in the state if there is doubt about whether the R&D tax credits will be available or if there is concern about them being scaled back.

As many employers have been telling state lawmakers in meetings at the Capitol, the mere fact that these proposals are on the table is detrimental. “You’re scaring off [business] investment,” said one Connecticut employer.
They’ve also been telling lawmakers that a stable, pro-growth tax policy has been instrumental in the state’s efforts to encourage businesses to locate, stay, invest, and create jobs here.

Credits work
R & D tax credits, for example, have been crucial in the growth of Connecticut’s bioscience industry. According to Connecticut United for Research Excellence (CURE), Connecticut bioscience companies currently employ more than 18,000 people and spend more than $6 billion on operations annually in the state. That’s up from 15,000 people and less than $1.5 billion in 1999.

Similarly, the electronic data processing equipment tax credit bolstered Connecticut’s insurance industry in response to a significant loss of insurance jobs to other states during the 1990s.

CBIA and the business community will continue to urge lawmakers to address the state’s fiscal problems by making government more cost-effective rather than by increasing the tax burden on businesses and further harming the economy. They should work to preserve Connecticut as a business location employers—and employees—can count on.

For more information, contact CBIA’s Bonnie Stewart at 860-244-1925 or


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