Finance Revenue and Bonding Committee

Boucher: this plan will put businesses at a disadvantage

Hartford, CT – Senator Toni Boucher (R-Wilton) as a member of the Finance Revenue and Bonding Committee attended an emotionally charged public hearing today that included taxpayers, businesses and residents who spoke out against Governor Dannel Malloy’s proposed tax changes in his new budget.

“The residents of Connecticut are overwhelmed,” said Senator Boucher. “People despised the largest tax increase in state history four years ago and today they are seeing more money coming out of their wallets. The increase in fees and the elimination of tax exemptions in this proposal are going to cost families and businesses.”

Malloy’s plan contains significant incremental tax revenue totaling $915.6 million, $103.4 million of which is inflicted on individuals and $812.2 million on corporations.

The plan being debated includes:

• lowering the state’s sales tax rate from 6.35 percent to 5.95 percent by April 1, 2017
• eliminate the $50 sales tax exemption on the first $50 of clothing
• delaying a planned increase in the personal income tax exemption for single filers from $14,500 to $15,000.

“According to the Department of Revenue Service (CT’s IRS) 90% of single filers had income of less than $75, 000. One cannot say that this budget does not harm the middle class,” added Boucher.

• eliminate the $250 biennial business entity tax
• making permanent the temporary 20% surcharge on corporate profits
• imposes a credit cap on tax credit claimed under Hospital Providers Tax
• reducing the amount of tax credit companies can utilize from 70% to 35% in 2015 and 60% thereafter, breaking commitments made to businesses that located into Connecticut
• Cuts, historical and farmland preservation, DDS, tobacco cessation programs, and respite care for the elderly

Tax credits are earned are based on expenditures that have already been made by companies. The Administration’s plan recommends capping the amount of tax credits that companies can utilize from the current 70% to 35% in Income Year 2015, 45% in Income Year 2016, and 60% in Income Year 2017 and thereafter.

“Businesses will be at 9% business tax disadvantage with other states,” remarked Boucher.

Boucher asked for clarification of the taking away of these tax credits. Business industry leaders testified that when you eliminate the tax credit it is a retro- active tax increase, the carry forward increase affects the planning timeframe companies anticipate. The final increase in the corporate surcharge puts businesses at a competitive disadvantage. Only five other states have a 9% business charge.

“This affects business confidence if the state keeps playing with those numbers businesses won’t be able to rely on Connecticut,” said Bonnie Stewart, Connecticut Business and Industry Association. “This proposal puts us on the rocks again.”

Boucher observed that many businesses testified they were promised these credits and now Connecticut is planning to break their promise. “It appears we are being subjected to a “state shell” game,” added Stewart.

During the hearing Gordon Gibson from the Connecticut State Grange spoke about his concern over the “temporary” loss of funds in the line item that affects open space and farm land preservation, “The Open space fund would be swept for the next two years and be transferred to General Fund.”

Senator Boucher remarked, “The inheritance tax, the income tax and gasoline tax were all supposed to be temporary. You have every reason to be cautious.”

Once again, instead of addressing some of the highest cost drivers of state government, the administration looks to the taxpayers and business to shoulder the burden of excessive other post-employment benefits (OPEB) and other post-retirement benefits that are out of step with the private sector.