Taxing Nonprofits is Fundamentally Un-American

April 26, 2017

On Tuesday, the Finance, Revenue and Bonding Committee heard several bills which included multiple tax increases. These proposals would increase the top marginal rate for the income tax, eliminate the tax exemption for nonprofits and increase the sales tax rate from 6.35 percent to 6.99 percent. These tax increases are extremely troubling; especially in light of information which indicates that Connecticut once again faces consistently eroding income tax revenues. These concepts send the wrong message to businesses and taxpayers during difficult financial times, proposing to tax nonprofits that deliver important goods and services to our communities is fundamentally un-American and wrong.

Senate Bill 1054 would retroactively raise income tax rates for our state’s top earners – which at the end of the day include many small business owners. This is an unconscionable proposal, when you implement a retroactive tax, financial stability and predictability is eliminated. This bill comes on the heels of proposals to expand the sales tax, increase the deposit for plastic bottles and impose a new tax on financial services. Our job growth is stagnant, people are leaving the state in droves and our economic climate is a disaster, adding more tax burdens and demanding that Connecticut residents give even more of their hard-earned money to the state is reprehensible.

In recent years, the state’s answer to budget deficits was to implement two of the largest tax increases in state history. The theory behind those increases was that more revenue would help the state get out from under its economic slump. Unfortunately, the opposite has occurred. High taxes have pushed people and businesses out of our state, which has led to further decreases in revenue and worsened our financial instability. Adding another burden in the form of substantial tax increases will not stabilize our state’s finances, it will only continue to push people out and saddle the individuals who are left behind.

Each year I evaluate and analyze each bill that comes across my desk. This year the two worst legislative proposals include a proposed 19 percent tax on financial services and the proposed tax on nonprofits. We have other states actively recruiting businesses from Connecticut and this is how we are going to combat that problem? We have a state budget that continually decreases funding to state services, and taxing nonprofits, who offer essential services to low income households, is a legitimate solution?

I have said it time and time again; these taxes will continue to drive people out of the state and hurt the state’s tax base even more. We cannot move forward with proposals like these. They are short-sighted and don’t take into consideration the fact that people are fleeing from this sinking ship.

As I stated in Tuesday’s Finance public hearing, the proposed tax on nonprofits is fundamentally un-American, we need to do be doing the right things, right now in order to fix our economic crisis, and these tax increases are not the solution.