Small Business is “Big” Business in Connecticut … and they deserve more respect

This month, it has been my pleasure to meet with the owners of some of Connecticut’s century-old small businesses that defy the odds and continue to thrive in the midst of economic chaos around the world. Much has been made of new state incentives for big businesses who create hundreds of jobs, but it is important to remember that the small business sector, Sub chapter S’s or LLC’s, are the true backbone of our state’s economy.

Between 70 to 80% of our 1.6 million jobs are created by businesses with 10 employees or less. They are also the ones most directly affected by the state income tax hike imposed retroactively to January 1, 2011 on August 1. New taxes and unemployment insurance assessments, as well as additional mandates such as mandatory time off further erode their ability to expand, or reinvest in new jobs and equipment.

Under its new budget, the state is taxing everything from dog grooming to yoga classes. Meanwhile, the state’s unemployment rate is at 9.1% after losing nearly 10,000 jobs in just the months of May and June. And during the next five months, new taxes will leave consumers with even less disposable income, putting a further strain on Main Street and stagnant labor numbers.

This year’s budget included:

An added hit to Connecticut business owners is our unemployment fund. Businesses will be receiving bills for interest on unemployment loans soon. This special assessment will affect more than 70,000 companies in our state, who will be forced to pay the interest on $810 million in federal money that the state borrowed to extended unemployment insurance benefits. Employers are being charged $1.70 per $1,000 of taxable payroll — a maximum of $25.50 for each employee.

This hidden tax comes at the worst of times and will cost Connecticut businesses $30 million this year and a total of $130 million over the next several years. Adding insult to injury, this year’s surcharge only addresses the interest on the federal loan and not the principal.

These policies are forcing businesses to move jobs and opportunity to states with a more business-friendly tax and regulatory structure. This fall, the legislature may have a opportunity to start reversing this trend, as an economic special session will be called. It is critical that elected leaders respect and listen to those on the front lines of job creation and implement their suggestions, such as: tax deferred reserve accounts so they can re-invest in their companies; elimination of some of the 70-plus new health insurance mandates; educational improvements in science and engineering; and relief from future surcharges related to the unemployment fund. Our state government should be working for small business, not against them!