Tax Proposals will Cost it Jobs, Weaken State’s Competitiveness

Just one part of the Finance Committee's tax package–eliminating the sales tax exemption on certain computer and data services–will cost Connecticut thousands of jobs, make the state’s information technology (IT) sector less competitive, and severely hinder the state’s economic recovery.

At a news conference this week, IT-sector employers, CBIA and the Connecticut Technology Council urged state lawmakers to reject that part of the Finance Committee’s tax plan as well as others that will have serious consequences for businesses, employees and Connecticut's economy.

According to a report from the state Department of Economic and Community Development, the elimination of the sales tax exemption on computer and data processing services could

• Cost 2,200 Connecticut jobs per year for the next 10 years
• Cause the state's gross domestic product to drop by $270 million a year for the next 10 years
• Result in a $219 million drop in personal income each year for the next 10 years.

 

“The sales tax exemption has helped hundreds of small [IT] companies to have a competitive edge here in the state of Connecticut,” said Eileen Hasson, president of The Computer Company, an IT services firm in Cromwell. “When you talk about sales tax being 6%, that’s a huge impact—a 6% increase on my client base, who are small to medium businesses to begin with and using our services because they don’t want to hire [their own] IT individuals.”

Thursday’s news conference was one of three scheduled by CBIA to call attention to tax proposals in SB-932 that would negatively affect Connecticut’s economy and cause job losses in key growth industries, including manufacturing, biopharmaceuticals, and IT.

“The business community continues to urge lawmakers to focus on making our state government smaller, more efficient, and more effective—and to reject the tax proposals that hurt our economic recovery,” said John Rathgeber, president and CEO of CBIA. He noted the most damaging measures in the Finance Committee’s plan, including those that would

Limit the value of tax credits, such as the R&D tax credit, that have contributed significantly to investments and job creation in Connecticut

Repeal sales tax exemptions that have helped employers compete and grow their operations in Connecticut

Raise the corporate tax rate by 30% for the next three years

 Some of Connecticut's most important and growth-oriented industry clusters—such as IT companies–are the ones needed to secure a bright future for the state. They are also businesses that are on the radar screens of other states.

“In the past, the state has recognized the value of IT firms and has taken steps to help the industry grow and create jobs,” said Ira Yellen, speaking on behalf of the Connecticut Technology Council’s board of directors. Yellen is president and CEO of First Experience Communication in Glastonbury. “These new taxes will discourage future investments and are specifically targeted at firms that have creatively responded to changing business opportunities to keep jobs here in the state.”

From the perspective of Computer Sciences Corporation (CSC), a global business and technology services company with 92,000 employees worldwide and 2,043 in Connecticut, the sales tax exemption has helped the company grow here.

“Over the past decade, the number of CSC employees in Connecticut has tripled, and the company has grown its Connecticut facilities from one data center to three,” said Joseph Schechter, president of CSC’s Americas Outsourcing Services.

Employers remind state lawmakers to know that Connecticut is in a global marketplace. The more that business costs increase here, the harder it will be to compete, stay in business, and retain jobs —and the more attractive other locations will become.

For more information about the tax proposals, contact CBIA's Bonnie Stewart at 860-244-1925 or bonnie.stewart@cbia.com.