The Price of Doing Business in Connecticut

March 2, 2011

While I commend Governor Malloy for piecing together a budget package, I fear it is one with limited potential to solve our state’s fiscal quandary. In his speech, the governor recognized the pressing need to create jobs and grow our economy, but at the same time has proposed one of the largest tax hikes in state history. Residents and businesses now face the potential of $1.6 billion in new taxation as they work to make ends meet.

Governor Malloy touts that Connecticut is open for business, but his budget plan proves otherwise. The red carpet he has rolled out to usher in new business has been muddied with new and increased taxes on our state’s employers. The Malloy budget includes measures like the “throw back tax” which fly directly in the face of efforts to grow business. Under this rule, a corporation with facilities in Connecticut that earns income that is not taxed in any other state will now have that income “thrown back” to the State of Connecticut where it will be taxed. While this rule has the potential to raise $20 million, it will give businesses another strong reason to leave the state.

The proposed budget also hurts highly valuable businesses that employ hundreds right here in our own backyard by reducing the ability of film companies to transfer the tax credit they receive for operating in state. This reduction hinders a good plan that has generated both jobs and revenue and takes Connecticut’s economy in the wrong direction.

The governor’s plan goes on to levy additional taxes on some of our state’s industries already struggling to survive the effects of the recession. Automobile dealers, for example, will face a double burden by having to pass along a luxury tax to customers and will have to charge this full tax on a newly purchased car when a trade-in is made. The shipyard and marina business that has incurred great losses in employment in recent years, dropping from 12,000 to 4,200, would also be subjected to increased taxation. Implementing Malloy’s broad-based taxes would stunt industry growth and have the potential to reduce employment even more dramatically. If we truly want Connecticut to be open for business, we need to lower tax rates to improve the business climate.

In recent years, the state’s population and economic growth have remained relatively flat while the size and cost of government has soared. Although government is spending beyond its means, Governor Malloy has proposed little to address that issue. Despite claiming that he has made cuts nearing $2.8 billion, Malloy’s budget actually spends more next year than it does this year. It increases spending from $19.3 billion in the current year, to $19.7 billion next year, and to more than $20 billion in 2013. I applaud him for seeking concessions and ways to reduce program spending, but if the governor is going to define his budget proposal as a shared sacrifice, reducing the costs of state government need to become a much larger part of his negotiations.

In order to ensure our state’s solvency, we must get our fiscal house and priorities in order. Unemployment continues to hang just below the national average at 9%, Connecticut has become the single worst state in the nation on a per capita basis in the category of overall indebtedness, and the state’s deficit has climbed to $6.1 billion. The way out of this recession and towards economic stability is through job growth and a right-sized government. New and increased taxes should not be on the table.

I look forward to working with Governor Malloy and the legislature in successfully filling Connecticut’s budget gap and also developing policies that welcome residents and businesses to our state. By putting Connecticut is a position to grow itself out of this fiscal quagmire, we can help those truly in need as well as rebuild the state’s economy for future generations.

As we move forward I ask that you keep in mind that every Connecticut taxpayer deserves the opportunity to voice their opinions about the state budget. If you would like to become a part of the budget process, I encourage you to attend one of Governor Malloy’s town hall meetings. These meeting will be held statewide, but a few in our area of the state include: Stamford, March 22nd from 7-8 p.m. at the Greenwich Center; Greenwich, March 28th from 7-8 p.m. at Town Hall; and Norwalk April 4th, time and location TBD.