GE becomes state Capitol’s latest political football [CT Mirror]

CT Mirror

General Electric Corp.’s ongoing search for a new home, possibly outside of Connecticut, has become the latest political football at the Capitol.

Two members of the Senate’s Republican minority called Friday for a special session to entice GE to stay by repealing a controversial new corporation tax provision.

Calling for a special session has been a popular GOP play in recent years to focus attention on issues where they believe Democrats are vulnerable.

But Democrats counter that the GOP is grandstanding and proposed a budget during the last session that now is out of balance and employs several gimmicks that Republicans usually decry.

“While you may not have the constitutional authority to order a direct repeal of the unitary tax, you can call a special session so that the legislature can take action on this critically important matter,” Senate Minority Leader Len Fasano of North Haven and Sen. Tony Hwang of Fairfield wrote to Malloy. “In doing so, you would be sending a resounding message – to legislators, the business community and the public alike – that we must take measurable steps to ensure GE and all Connecticut-based businesses remain valued partners.”

“We do not intend to call a special session on this topic,” Malloy spokesman Devon Puglia said Friday. “However, if the senator has a thought-out, thoughtful, realistic proposal that doesn’t involve phantom savings, we are happy to listen to it.”

“Once again, Connecticut Republicans are siding with Wall Street corporations and their legions of tax lawyers and accountants instead of Main Street businesses that can’t afford those same luxuries and those same tax loopholes,” Senate Democratic Caucus spokesman Adam Joseph said. “Connecticut was the last state in New England to enact combined reporting for corporations. Democrats remain focused on our positive state employment numbers and our increasing economic output.”

A spokesman for the House Democratic Caucus declined to comment.

At issue is a new budget provision that imposes a unitary reporting requirement next year within the corporation tax.

In Connecticut, companies largely have to report only the earnings of their in-state operations — a requirement that critics charge allows corporations to hide profits among out-of-state affiliates, and thereby minimize their tax bill here.

The new unitary requirement would compel companies to share information on all of their operations — both in Connecticut and outside — and undergo a more detailed assessment of what earnings are tied to their presence in this state.

Analysts estimate Connecticut companies would pay an extra $23.7 million per year with this requirement.

Malloy confirmed this week that he and others in his administration have met with GE and proposed some specific assistance to keep its headquarters in Fairfield, though the governor didn’t disclose details.

GE was one of several major Connecticut employers that publicly criticized Malloy and the General Assembly after they negotiated a new biennial budget that would have increased state taxes about $1.5 billion across this fiscal year and next combined.

Malloy relented on the deal his administration originally signed off on, and pressed his fellow Democrats in the legislature’s majority to scale back the overall tax hike. A revised two-year plan was enacted in late June that reduced the overall two-year tax hike by just over $175 million, including repeal of a planned tripling of the state tax on data processing services. The unitary requirement, originally applied to the 2015 tax year, was delayed until 2016.

Republicans argued this relief was too little and predicted companies would begin leaving Connecticut.

Fasano said the governor’s office’s response Friday “shows the governor refuses to lead. … The Democratic Party — with the governor — is proud of and has no interest in getting rid of the unitary tax.”

House and Senate Republicans often point to an alternative budget they proposed that offered $270 million in tax cuts over the next two years, but at the same time it canceled or delayed $243 million.

But there are some problems with that proposal.

It relied upon about $900 million in savings from labor concessions, wage and hiring freezes and overtime reductions.

Unions already have said they wouldn’t grant givebacks this year, having provided concessions in 2009 and 2011. That would leave large-scale layoffs as the only option to achieve most of those savings.

And since the Republican budget was first issued, fiscal analysts have downgraded revenue projections for the next two years, leaving the GOP plan $227 million out of balance.

House Republicans didn’t offer any proposals to rebalance it.

Fasano offered a plan to do so in June, but it included borrowing to cover debt payments, specialized fund sweeps and the postponement of middle class tax relief – options he has criticized in Democratic proposals.