Governor’s Tax Plan Misses on Much-Needed Small Business Support
Gov. Ned Lamont released a proposed $336 million tax package Feb. 2 that targets property taxes and accelerates the planned exemption of pensions and annuities from the state income tax.
Missing from the plan? Support for hard-hit small businesses.
“While it is always great to be discussing tax cuts instead of tax hikes, this proposal represents just a part of the solution for ensuring a robust economic recovery,” CBIA president and CEO Chris DiPentima said in response to the Lamont administration’s plan.
“Too many of Connecticut’s small businesses—critical to our recovery prospects—are struggling and desperately need help addressing the labor shortage, inflation, pending tax hikes to pay off the state’s unemployment fund debt, and numerous other challenges.”
While DiPentima welcomed efforts to address the state’s affordability issues—CNBC’s 2021 America’s Top States for Business study ranked Connecticut’s cost of living seventh highest in the country—he said the plan “fell short.”
“Making Connecticut more affordable is essential for keeping current residents and attracting new ones to grow our tax base and workforce, and the governor’s proposals provide some measure of relief for individual taxpayers,” he said.
“However, that is only part of the overall prescription needed to bring back jobs and drive an economic recovery with opportunities for all.”
Property Taxes, Pensions
Lamont proposed restoring full eligibility for the property tax credit to current income limits of $109,500 for single filers and $130,500 for joint filers and increasing the credit from $200 to $300.
He also proposed accelerating the phased exemption of pensions and annuities from the income tax from 2025 to 2022. Single filers with adjusted gross incomes below $75,000 and joint filers with less than $100,000 qualify.
In addition, he will ask the legislature to lower the cap on motor vehicle property taxes—passenger, commercial, and combination vehicles—from 45 mills to 29 mills and reimburse local governments $160 million for the projected loss in revenue.
The governor did propose expanding the 50% tax credit for employers that pay up to $5,250 toward an employee’s student loans. That expansion would cost $9.4 million.
However, few small businesses qualify for the program, which is only available to C corporations and businesses that pay the insurance premium tax.
CBIA last month released a series of policy recommendations designed to drive the post-pandemic recovery by focusing on the labor shortage and implementing comprehensive tax relief for individual taxpayers and businesses.
Those recommendations include expanding the manufacturing apprenticeship and R&D tax credit programs to small businesses, exempting workforce training programs and safety apparel from the sales tax, and using additional federal COVID-19 funds to help pay off $520 billion in outstanding unemployment fund loans.
“The state’s near-term fiscal health is one of the strongest in the country,” DiPentima said. “That provides a platform to do much more than hold the line on taxes and pay down long-term liabilities.
“Let’s address workforce challenges that have simmered for years because of our sluggish population growth and now represent the greatest threat to our recovery.”
Connecticut has recovered 75% of the historic 292,400 jobs lost to pandemic lockdowns and restrictions, trailing most of the region and the country, while the unemployment rate is tied for sixth highest in the country.
The state’s labor force—the number of employed workers plus those actively looking for work—declined a further 17,000 people in 2021 and is down 92,000 (5%) since February 2020.
“There are 74,300 fewer people working in Connecticut today than in February 2020, despite an estimated 70,000 unfilled job openings.” DiPentima said.
“Eighty percent of employers report difficulty finding and retaining workers. The labor shortage represents the greatest threat to Connecticut’s economic recovery and long-term growth.”
DiPentima said policymakers have an opportunity “to send a huge message” to the state’s small employers, which make up 99% of Connecticut companies and employ almost half the workforce.
“The policy choices made over the next few months will determine the strength and viability of our economic recovery,” he said.
EXPLORE BY CATEGORY
Stay Connected with CBIA News Digests
The latest news and information delivered directly to your inbox.