‘Capitol Connection’ – Businesses Whacked Again

September 11, 2013

When the state’s largest trade association reports that business executives’ attitudes toward Connecticut are the most negative they’ve been in 12 years we all need to listen.

In the 12th annual survey of businesses by the Connecticut Business & Industry Association (CBIA) and BlumShapiro (accounting agency), 80 percent of the 377 companies who responded had a negative or somewhat negative opinion of Connecticut as a place to do business. Only 11 percent said the state was a somewhat or very positive place to do business.

Why was this survey the lowest reading recorded by the CBIA in the history of the survey? The report attributed the depressing attitude to the 2011 increase in the personal income tax among other things. As a small business owner, I can understand where this attitude comes from. Some of my frustration comes with the unemployment taxes piled onto the plates of entrepreneurs.

When someone opens a business they are charged special taxes for every worker they employ. The money is used to fund the unemployment trust fund, whether or not you as a business owner has ever laid anyone off before. If someone is laid off or loses their job through no fault of their own, they can receive unemployment checks until another job comes along. The state provides up to 26 weeks in unemployment compensation benefits which range from a low of $25 to a maximum of $591. This piggyback onto the Federal unemployment allows an individual to collect a whopping 99 weeks or almost two years of unemployment

I have no problem paying the tax. The program is laudable. My concern is Connecticut’s unemployment trust fund has become insolvent and we aren’t doing enough to make the business climate better. Furthermore, a recent column in the Hartford Courant reported that it pays more to stay on state assistance than it does to get a job. Don’t you see something wrong with this picture? Connecticut, like other states, has had to borrow money because the benefits paid to recipients are more than what has been collected in unemployment taxes.

Translation: high unemployment and no new business create a bad economic environment. There are 32,600 fewer Connecticut residents working now compared with January 2011.

As of this month our state owes the federal government more than $573 million in outstanding unemployment loans. 18 other states also have outstanding loans from the federal government.

Since 2011, the CT Labor Department has levied a “special assessment” on employers to pay the interest owed to the federal government. In 2011, employers paid an additional $30 million; $23 million in 2012. For 2013, employers will pay an additional $18 million.

The federal government also has its own unemployment tax which businesses have to pay. Those taxes have increased for employers too. Normally, the effective tax rate is $42 per employee per year. However, since the state has had these outstanding loans with the federal government, the tax rate has doubled to $84 per employee per year. It is likely that the state will have outstanding loans in the coming year, so this federal tax rate will be increased once again.

Our state needs job creation. Government does not create jobs, people do. In Connecticut we hurt entrepreneurs by taxing them more in a time when the cost of doing business is already high. This cycle has to be broken. If people are working then the unemployment fund will have a chance to replenish.

After seeing the results of their survey, the Connecticut Business and Industry Association is urging leaders in Hartford to:

  • reduce state spending
  • ease the tax and regulatory burdens
  • create more tax incentives for small businesses

I couldn’t agree more. I have a unique perspective as both a small business owner and a lawmaker. If we don’t change the business climate in our state now, we all suffer.