Corporate Welfare, Malloy, Taxes, Unemployment Malloy, Taxes, Unemployment
Governor Malloy calls on Federal Government to pay unemployment benefits for Sikorsky shutdown adding its “unacceptable that Connecticut taxpayers be made to pay for the failures of Republicans in Washington.”
It is unacceptable for Connecticut taxpayers to be paying for the failure of Republicans in Washington, but the Sikorsky situation isn’t the right example. And don’t get me wrong, I want to blame the Republicans for absolutely everything too.
However, as Governor Malloy reveals in this situation, losing contact with the truth undermines the effectiveness of one’s rhetoric;
According to a blog post written by Stamford Advocate and Hearst Newspaper Group reporter, Brian Lockhart, “Democratic Gov. Dannel Malloy Friday said he wants the federal government to fully reimburse Connecticut and all states for the cost of unemployment benefits and administering those benefits to workers impacted by the government shutdown.”
Lockhart writes that, “In Connecticut Malloy was referring specifically to Sikorsky Aircraft in Stratford, which Wednesday announced will furlough about 2,000 workers, effective Monday.
The company said the inability of Congress and the White House to reach a federal budget agreement and end the government shutdown has severely hampered its ability to manufacture and support helicopters used by the military.”
Lockhart quotes Malloy as saying, “These workers and many more throughout Connecticut are out of work because House Republicans insist on playing childish political games. Families are suffering, and it’s unacceptable…As many of these workers begin applying for unemployment benefits, it’s also unacceptable that Connecticut taxpayers be made to pay for the failures of Republicans in Washington.”
Three cheers for the condemnation of the Congressional House Republicans.
Right on about the fact that it is unacceptable that families are suffering as a result of the idiotic political maneuvers of the Congressional House Republicans.
But Malloy’s statement about Connecticut taxpayers picking up the tab for the unemployment benefits is exactly the reason so many small business people think many Democrats simply don’t understand what owning a small business is all about.
Having paid my share of unemployment taxes for my employees let me take a shot at explaining to Governor Malloy how things work when it comes to unemployment taxes.
Unemployed workers are paid benefits from a fund that is paid for by businesses, not directly by state government and its taxpayers.
Employers pay federal and state unemployment taxes. These funds are used to pay for the operation of the unemployment system and the benefits that go out to unemployed workers.
The amount of unemployment tax a Connecticut business pays depends on the number of employees they have and the company’s history of creating unemployed workers. A business is charged a base rate, but if it lays off workers due to a lack of business, that unemployment tax rate increases.
With Connecticut’s unemployment rate stuck at about 9 percent for so long, Connecticut’s unemployment fund, like those in most states, run out of money and the states had to borrow money from the federal government to meet their obligations when it came to paying unemployment benefits.
The Great Recession was so bad that as of two and half years ago, more than 30 states, Connecticut included, had already borrowed more than $41 billion from the federal government.
That money must be paid back, with interest, and the way it is paid back is by charging businesses a higher federal unemployment tax. Experts have reported that even at the higher rate, it may take Connecticut more than a decade to pay back the money that Connecticut has already been borrowed.
That isn’t to say we shouldn’t be upset about the Republicans and their antics, but the money for unemployment benefits that are resulting for their stupidity is actually being paid for by Connecticut’s businesses that are already burdened with trying to pay back the money Connecticut had to borrow to pay for unemployment benefits over the last few years.
If the governor wants to lobby the federal government to help Connecticut’s businesses he should be demanding that the President and Congress do something to reduce the burden for those states that had to borrow billions.
Small businesses are the foundation of Connecticut’s economy. Governor Malloy has spent hundreds of millions on corporate welfare to “persuade” successful businesses to add a few hundred jobs in Connecticut. Instead of wasting money on those big ticket items, state government should be focusing in on ways to help small business succeed.
The unemployment tax issue is a perfect example and that problem isn’t resolved by demanding that the federal government pay for Sikorsky’s unemployment benefits for the next few weeks.
Gas Tax, Malloy, State Budget, Taxes Gas Tax, Malloy, State Budget, Taxes, Wyman
On Thursday, Governor Malloy and Lt. Governor Wyman held a press conference to address issues surrounding the newly adopted state budget. Malloy told reporters, “I think that there are no taxes in this budget that were not present previously…There are no new taxes.”
That is, the Governor is suggesting that the following are not “new taxes”…
- The largest gas tax increase in Connecticut history that will take effect on July 1, 2013. At present wholesale prices, the additional gas tax will add about 4 cents per gallon. This increase will bring in about $60 million to Connecticut’s Transportation Fund. However, as the CT Mirror noted, “the new budget then shifts $91 million from that fund into non-transportation programs next fiscal year.”
- $17.5 million more from extending the $2.50 per megawatt-hour tax on power plants from July 1, 2013 to October 1, 2013 (Malloy had wanted a 2 year extension).
- $44 million more in FY14 and $74 million more in FY15 due to retaining the 20 percent surcharge on the corporation tax that was supposed to end on July 1, 2013.
- $27 million more each year as a result of keeping the cap on an insurance premium credit program for businesses.
- The state will also have an additional $21 more next year by reducing Connecticut’s Earned Income Tax Credit from 30 percent of the federal EITC to 25 percent. It would then go to 27.5 percent in the second year of the budget.
- As the CT Mirror also reported, the new budget has a huge impact by re-directing the money that was coming in as a result of a tax on hospital bills. “Hospitals have been paying $350 million a year through a provider tax since July 2011. But the state had been reimbursing hospitals for all of those dollars, using the tax as a mechanism to qualify for more federal health care assistance. This new budget reduces aid to hospitals by more than $500 million in total over the next two fiscal years, including about $400 million cut from the grants used to reimburse hospitals for the provider tax they pay.” (CT Mirror)
- And approximately $31 million in new state revenue as a result of allowing Keno in Connecticut bars and restaurants. (The $31 million is after the Compact with the Mashantucket Pequot and Mohegan tribes are modified to provide each tribe with 12.5 percent state’s Keno proceeds.)
In addition, the two-year budget is balanced by shifting money to the state’s General Fund that was supposed to be used for particular purposes and paid out of dedicated funds:
- $25 million from the banking fund.
- $12 million the tobacco and health trust fund.
- $35.4 million from energy efficiency programs.
- $35 million from CRRA (the quasi-public trash authority).
- $10 million from a stem cell research fund (But the state will barrow an additional $10 million for that research.
- $1 million from the probate court fund.
- And the new budget also utilizes this year’s entire $221 million projecting surplus, instead of using it to pay down outstanding debt.
Budget Cuts, Human Services, Malloy, State Budget, Taxes Budget cuts, General Assembly, Human Services, Malloy, State Budget, Taxes
Over the weekend, there was a heart-wrenching commentary piece in the Hartford Courant that was written by the father of a 28-year-old intellectually disabled daughter.
His daughter’s name is Katie and he wrote, “She lives at home with my wife, Donna and me. She is the love of our lives and we embrace the gifts she brings to us and to all who know her.”
His piece was entitled, “Amid Stark State Cuts, A Father’s Plea: Who Will Care for Katie?”
Katie’s father reported that “Last November, the governor exercised his rescission authority and, without notice, reduced funding for people with disabilities who receive residential and day services. Making these cuts permanent, as proposed, delivers a body blow to vital assistance Katie receives from the Department of Developmental Services through organizations such as HARC. The latter is a long-respected family organization that provides critical services for people like Katie. It was founded by parents like me as a self-help group, at a time when institutionalization was the only choice for help. The splendid people at both these agencies are a blessed lifeline for my daughter and others.”
While every Connecticut resident, and especially every elected official should read the full article, it is easy to understand his core message.
There are useful state services, there are important state services, there are vital state services and then there are essential state services.
The services that Katie and her family receive are truly essential.
These services are essential, not only because we hold ourselves out to be a humane and caring society, but because the cost of respite and day services allow thousands of our fellow citizens to live at home rather than in far more costly institutions.
These are services that government provides because it is the right thing to do.
There are also services that when cut define the notion of being pennywise and pound foolish.
No governor, Democrat or Republican should have cut those services, but Governor Malloy did.
No Legislature, Democrat or Republican should have allowed those cuts to go forward, but Connecticut’s legislature did.
Reasonable people can have reasonable discussions and debates about appropriate levels of taxes and services, but a stunning large number of the cuts in Governor Malloy’s rescission package and the deficit mitigation package that he proposed and the legislature passed with bi-partisan support were not reasonable.
Those cuts passed because few legislators took the time to study the package and fewer still had the courage to stand up and say no to this governor.
Over the next 90 days the Connecticut General Assembly will be reviewing Malloy’s budget proposal for the next two fiscal years.
There is truly no excuse for aspects of what Malloy has proposed and even fewer excuses for the legislature to accept them.
Take a moment to read this father’s piece and know that it is just one example of budget cuts that have been made or are being contemplated that leave some of our most vulnerable fellow residents without the help and support they so deeply need and deserve.
Government officials will only respond when they know that their constituents will hold them accountable for their actions.
It is essential that our elected officials understand that that is exactly what we are going to do.
You can read the commentary piece at: http://www.courant.com/news/opinion/hc-op-duffy-who-will-care-for-katie-0303-20130301,0,7996231.story
Ben Barnes (OPM Secretary), Budget Cuts, Gas Tax, Malloy, State Budget, State Deficit, Taxes Budget cuts, Malloy, State Budget, State Deficit, Taxes
There are a lot of things I don’t agree with Senator John McKinney about, but in this case he is absolutely right. Governor Malloy’s proposed budget is a sham and a shame. It is an embarrassment that a Democrat proposed such an irresponsible budget and the Democrats in the Legislature will need to start from scratch.
As Senator McKinney put it, “”There’s so many gimmicks. I don’t know where to stop…This is the most dishonest budget I’ve seen.”
He is sadly correct in his assessment.
Governor Malloy told the Connecticut General Assembly;
“The budget I am proposing today keeps Connecticut moving forward… [and is] “an honest, balanced budget [that emphasizes] living within our means.”
But, in fact, it is a proposed state budget that;
- Coddles the rich by refusing, once again, to require them to pay their fair share in taxes
- Includes the largest gas tax increases in state history
- Shifts tens of millions in municipal aid to the state’s credit card
- Includes more than $250 million in cuts to vital social services
- Cuts $146 million in state aid for Connecticut hospitals (on top of the $103 million cut)
- Eliminates Medicaid coverage for thousands of poor parents who are now covered by the program that covers their poor children
- Eliminates the Charter Oak Health Plan, an insurance program for those who can’t get affordable healthcare elsewhere
- Reduces the state’s new Earned Income Tax Credit from 30 percent of the federal EITC to 25 percent (retroactive to Jan. 1), thereby removing a portion of the incentive that seeks to keep the working poor working as opposed to going on welfare.
- Creates a new tax on power plants and continues a surcharge on the corporation tax — both of which were set to expire next fiscal year
- Borrows $750 million replace the plan he never implemented to move the state to GAAP financing
- Creates a $631 million state budget deficit in FY16
- And MOST IMPORTANTLY balances the budget by delaying repayment of $1 billion that Connecticut borrowed in 2009 under Gov. M. Jodi Rell.
For more on this absurd plan read:
Ben Barnes (OPM Secretary), Budget Cuts, Malloy, Spending Cap, State Budget, State Deficit, Taxes Budget cuts, Malloy, Spending Cap, State Budget, State Deficit, Taxes
CT Mirror’s Keith Phaneuf has posted an article outlining the budget plan Governor Malloy will be presenting to the Connecticut General Assembly later today.
After reading the article, an experienced “Connecticut budget watcher” would be forced to say; “imagine the worst, fiscally irresponsible scenario and then triple or quadruple the negative aspects of the plan” … and you still don’t get to what Governor Malloy will be presenting for the upcoming Fiscal Year 2014-2015 state budget.
Much more will become available as the day goes on, but here are the highlights (or more accurately – low lights) of the Governor’s budget proposal.
While promising a budget that has no new taxes, preserves his education reform program and dramatically expands spending in a few key areas, it is now clear that the Governor’s plans and proposals are virtually completely achieved by adding even more debt to Connecticut – the state that already has the worst existing debt burden in the nation.
Not only does Malloy’s $1.5 billion UConn initiative rely on borrowed funds, but he solves Connecticut’s $1.2 billion projected budget short fall through a complex, even bizarre, borrowing scheme.
The key component of Malloy’s new budget plan relies on getting more revenue from refinancing debt from the last recession, borrowing money to pay for municipal aid that was paid for with general fund dollars in the past and engaging in a new gimmick to make it appear the state is finally moving forward with its shift to Generally Accepted Accounting Principles (GAAP).
In addition, Malloy’s budget proposal raises “about $140 million in new tax revenue by continuing expiring taxes on power plants and other businesses, and by reducing a tax credit for working poor families.
Apparently Malloy’s primary “budget financing plan” includes coming up with an additional $750 million dollars by “delaying repayment of $1 billion Connecticut borrowed in 2009 under Gov. M. Jodi Rell…Originally scheduled to be paid off in the 2015-16 fiscal year, the debt would be extended at least until 2018 in Malloy’s new budget.”
Meanwhile, two years ago, Candidate Malloy promised to immediately move the state to Generally Accepted Account Principles (GAAP). When Governor Malloy realized the cost of his campaign promise he shifted his plan to make a $75 million down payment in year one, a $50 million down payment in year two and then enter into a 15 year plan to shift the state to GAAP by investing $100 million a year for the next decade and a half. However, faced with budget deficits over the past two years, Malloy skipped the $75 million payment, then he skipped the $50 million payment and now he will be proposing to borrow the money to shift to state to GAAP, rather than actually make the necessary cash payments to resolve the problem the fiscally responsible way.
In addition, according to this new budget, Malloy will also turn to the state’s already overburdened credit card to provide more municipal aid. Last year he decided to borrow the funds, rather than pay cash, for the state’s $30 million municipal road aid program.
In this new budget, he is proposing borrowing another $60 million to give towns their Mashantucket Pequot/Mohegan Tribe slot revenue allocations. In that way, the state could keep all the Native American Indian Gaming funds for itself.
And the most incredible, piece de résistance, is that Malloy’s proposal to increase education funding – the plan he announced yesterday – appears to be paid for by changing (cutting) the Payment in Lieu of taxes program – the grant that towns get for lost revenue from state-owned property. Malloy’s plan apparently shifts money from the Public PILOT program to the Education Cost Sharing Formula, but calling the funds “NEW MONEY” for education even though the towns aren’t actually getting any additional money.
And as noted above, the CTMirror story suggests that “the governor will propose reducing the state’s new Earned Income Tax Credit from 30 percent of the federal EITC down to 25 percent.”
Finally, the Governor’s plan also re-writes the state spending gap law to allow this increased spending to take place without having to go through the more burdensome supermajority requirements that would otherwise have been needed under the state’s existing spending cap law.
More details to come as Budget Day 2013 progresses.
For the CT Mirror article go to: http://ctmirror.org/story/19025/malloys-push-avoid-taxes-preserve-education-spurs-more-borrowing
CTNewsjunkie also has additional details at: http://www.ctnewsjunkie.com/ctnj.php/archives/entry/republican_lawmaker_is_not_impressed_with_malloys_budget/
Ben Barnes (OPM Secretary), Budget Cuts, Malloy, Spending Cap, State Budget, State Deficit, Taxes Malloy, Spending Cap, State Budget, State Deficit, Taxes
Connecticut is facing a $148 million budget deficit this year
If the state’s elected officials want to maintain current services, that is adopting a budget that preserves the present level of programs, the state will be facing a $1.2 billion deficit next year.
In addition, a current services budget would mean an expenditure level that is at least $1.2 billion over the state’s legal spending cap.
So what is pushing up state spending?
Andrew Doba, Malloy’s spokesperson, recently told CTNewsjunkie that items forcing the state budget up include, “Medicaid expansion under the Affordable Care Act, fast-growing pension contributions resulting from more prudent assumptions, and our commitment to convert to GAAP.”
Actually, Medicaid expansion under the Affordable Care Act (ObamaCARE) is an extraordinarily small part of the increase in Medicaid spending. The culprit is the poor economy and growing poverty which are pushing up caseloads. (But it is easier, I suppose, to blame the President)
Second, while pension costs are going up, Malloy’s plan is a drop in the bucket compared to what is needed to properly fund Connecticut’s $22 billion in unfunded state and teacher pension systems, not to mention that they are BELOW what Governor Malloy promised to allocate for those funds.
And third, to blame the conversion to GAAP accounting is beyond absurd. Candidate Dan Malloy promised to immediately move Connecticut to the path of fiscal honesty by converting the state’s account system to Generally Accepted Accounting Practices. When it became apparent the cost of honesty was “excessive” he proposed making a $75 million down payment last year and a $50 million down payment this year followed by a 15 year program to phase the state to GAAP accounting with a commitment of an extra $100 million a year.
Then, quiet like a mouse, Malloy and the General Assembly skipped the first $75 million down payment, then skipped the second $50 million down payment and the required $100 million initial payment next year is hardly what is causing the $1.2 billion dollar projected deficit.
Then, adding insult to injury, the notion of “balancing the budget” without taxes is simply not true. Present law already includes the largest gas tax increase in state history that will kick in on July 1, 2014 and Malloy’s budget is certainly going to include the continuation of taxes that were supposed to be eliminated this year.
And meanwhile, those making more than $1 million dollars are still benefiting from the fact that the income tax rate was increased for all middle-income families in Malloy’s $1.5 billion tax increase in 2011, but the rich saw no increase in their income tax rate whatsoever.
And finally, one of the greatest gimmicks of all is already starting to make an appearance.
Connecticut adopted a system of consensus revenue forecasting to remove some of the politics from the administrative branch of government’s desire to look at the world through rose-colored glasses.
The system requires the Office of Policy and Management and the non-partisan Office of Fiscal Analysis to determine what revenue is coming in.
At a press conference earlier today, Governor Malloy announced that an agreement between the State of Connecticut and Amazon had been reached that will require Amazon to collect sales tax from Connecticut residents and send the funds to the Commissioner of Revenue services.
When asked how much is expected from the agreement, Malloy announced that it would come to an extra $15 million a year and that the funds had already been built into his proposed budget. Malloy said he’d gotten the number from Amazon.
The problem, the Office of Fiscal Analysis, in its official capacity, already projected that the state would get about $9 million from a bill that required Amazon to collect the sales tax and send it on to the state – and that was before this most recent dip in economic activity.
But instead of using the more conservative, and legally appropriate fiscal impact number, or even a number developed through a consensus between his Office of Policy and Management and the Office of Fiscal Analysis, the Governor used an unconfirmed amount AND built the artificially higher number into his proposed budget.
We haven’t even gotten to budget day and already the governor is announcing assumptions that are designed to inaccurately explain away the problems and gloss over the realities of the fiscal crisis that continue to grip our state.
Yet again, fiscal reality is being pushed aside by political expediency.
Malloy, State Budget, Taxes Malloy, State Budget, Taxes
Last year, Governor Malloy raised income taxes only on those making less than $1 million. He left the wealthy completely untouched when it came having to pay higher income rates. Last week he reiterated his commitment to no new taxes.
So when it comes to equity, where do we really stand?
In Connecticut, since the mid-1990s (adjusted for inflation);
Income for the wealthiest 20 percent has INCREASED by 17.2%
Income for the middle 20 percent has INCREASED by 2.5%
Income for the poorest 20% has DECREASED by 9.8%
And note that this is post-federal tax income and does include the value of the Earned Income Tax credit, the value of food stamps and any housing subsidies.
Meanwhile, the richest 5 percent of Connecticut households now have incomes 5 times larger than the middle 20 percent and 14 times larger than the poorest 20 percent.
More to come about a new report on income inequality from the national, non-partisan, Center on Budget and Policy Priorities and the Economic Policy Institute.
Ben Barnes (OPM Secretary), Budget Cuts, Malloy, State Budget, State Legislature, Taxes Budget cuts, Malloy, State Budget, Taxes
Governor Malloy and Connecticut state government will face a projected budget deficit or revenue shortfall of $1.1 billion next year.
Later today, Malloy’s budget office and the General Assembly’s Office of Fiscal Analysis will be submitting their mandated annual fiscal projects about revenue and spending.
The Malloy Administration’s $60 million projected deficit in the days leading up to the election has become a $365 million deficit.
And the projected deficit for next year is now set at $1.1 billion.
As Keith Phaneuf of the CT Mirror writes, “since the governor and legislature must balance the current books and craft a new two-year spending plan this spring, that means they must wipe nearly $2.5 billion in real and projected red ink off the state’s books before the 2013 session ends next June.”
The massive fiscal problem comes after the Governor and Legislature adopted $1.5 billion in new taxes last year, while making significant budget cuts and achieving state employee concessions.
Phaneuf goes on to note, “The administration’s two-year estimate exceeds $1.9 billion in red ink. Just nine months earlier, members of the administration said the state could look forward to surpluses totaling more than $1.1 billion over the same two-year period — a $3 billion shift for the worse.”
Earlier this year, the Malloy Administration projected that the State of Connecticut would have a “$226 million surplus in 2013-14 and a $942 million in the final budget year of Malloy’s term.”
Here are the latest links to news stories about the projected deficit:
Economic Development, Malloy, Taxes Economic Development, Malloy, Taxes
It’s bad out there.
And of course, the burden of these difficult economic times is not equally distributed.
Here in Connecticut, in order to balance this year’s state budget, the Governor proposed and Legislature adopted $1.5 Billion in new or increased taxes.
While the legislation included a very effective targeted Earned Income Tax Credit (EITC) to help poor working families to stay off welfare and survive, the tax bill also exempted the super rich from having to pay any more in state income tax.
The net effect is that the wealthiest 1% of Connecticut taxpayers still pay only half as much of their income in state and local taxes, as compared to the poorer and middle classes.
Percentage of income paid in state and local taxes (inc. Federal Offset) after 2011 tax increase:
Lowest 20% of income earners 11.4%
Lower-Middle 20% 9.6%
Middle 20% 10.2%
Upper-Middle 20% 9.9%
Next 19% 8.9%
Top 1% of income earners 5.5%
Meanwhile, thanks to salary and wage gains, the rich in Connecticut have gotten richer while most of the rest of us have seen our incomes stagnant – at best.
Over the last four years, the top 10 percent of Connecticut wage earners saw their incomes grow by 14.4 percent, while those at the other end of the income spectrum had wages that only went up by a paltry 1.3 percent.
Women were been especially hard hit. Before the Great Recession, women in the United States made, on average, 81 percent of what men made. At the same time, here in Connecticut, women earned 79 percent of what men made. By 2010, that number had DROPPED to 76 percent.
Minority workers have also been especially impacted over the last few years. In 2007, when women in Connecticut made 79 percent of what men made on average, African-Americans in Connecticut were earning 72 percent of what whites earned. By 2010 the number for Blacks had dropped to 67 percent of whites’ median wages.
Virtually every report, including the latest work by CT Voices for Children has determined that “Educational inequality is a key factor driving wage inequality.”
While 2012 has been pegged as the year of “Education Reform”, 2011 saw the deepest cuts in state history to our public colleges and universities and an ill-conceived merger between the Connecticut State University system and Connecticut’s Community Colleges.
In addition, the Malloy Administration announced that it was considering limiting access to Community Colleges to only those who don’t need as much remedial help.
As elected officials consider the value of supporting public education and the scope of the educational reforms that are needed, they should memorize the following from a recent CT Voices Report;
“Workers with bachelor’s degrees earned twice the median wage of those with less education, and saw an 8 percent increase in wages from 2006 to 2010, while those with only a high school diploma suffered a 5 percent reduction in wages over the same period. Forty percent of Connecticut’s whites have a bachelor’s degree, compared to only 18 percent of blacks and 14 percent of Hispanics.“
It’s clear what happens when we stand around waiting for the benefits of economic activity to trickle down from the rich.
The time has come to change our economic development, education and tax policies to ensure that a far broader base of Connecticut residents benefit.
For more information about these issues go to the Connecticut Voices website at http://www.ctkidslink.org/pub_issue_10.html and http://www.ctkidslink.org/media/other/bud11whopays.pdf
Economy, Malloy, Taxes Corporate Tax Breaks, Malloy, Taxes
While awareness has grown about the concept of tax fairness for individuals, little is understood when it comes to the reality of business taxes.
In Washington, as in Harford, much of the political debate has been revolving around the concept of whether all wage earners should be asked to pay their “fair share” in taxes. After maintaining the Bush Era tax cuts, President Obama has finally taken on a new and refreshing approach toward demanding that the wealthiest Americans pay a bit more in order to balance the budget and preserve vital services.
As readers of this blog know, here in Connecticut, the wealthiest among us pay about 5% of their income in state and local taxes while middle-income families pay 10% and the poor about 12% of their income go in state and local taxes.
Although Connecticut adopted record tax increases this past Legislative Session the fundamental lack of fairness in Connecticut’s tax structure was maintained.
At the same time there is an almost universal consensus that business taxes are high and that those high business taxes are hurting Connecticut’s economy.
While the “cost of doing business” in Connecticut is high, business taxes is NOT one of the primary reasons. According to the reputable Council on State Taxation, a national, non-partisan research group, Connecticut’s business taxes account for 3.3% of private sector economic activity (also known as private sector gross state product, GSP). That compares to the national average – in which 5.0% of private sector economic activity go toward state and local taxes.
Energy, healthcare, transportation and labor costs are all proportionately higher in Connecticut. Public and private sector leaders could do a lot more for Connecticut’s economy by looking to reduce or subsidize those cost drivers.
Perhaps even more importantly, the relatively low overall rate of business taxation hides a far more serious issue and that is that Connecticut’s business tax structure is a full of loopholes, tax credits and special exemptions that reward some business sectors while burdening others.
This problem is particularly clear when looking at Connecticut’s corporate tax credit program. The much touted UConn Center for Economic Analysis reported that of the 24 state corporate tax credits, 14 “led to net job losses, including one of Connecticut’s largest tax credits, the fixed capital investment credit.”
Back in 2005, the General Assembly’s Program Review and Investigation Committee even found that 16 of the tax credits programs “appear of little benefit to the state’s economy, and should be eliminated.”
Even Connecticut’s own Department of Economic and Community Development has reported that there are big problems with some of the state’s tax credit programs.
However, every time changes are even mentioned the call goes out that state government is trying to raise business taxes and efforts update and reform Connecticut’s tax credit program a thrown aside.
The Digital Media and Film Tax Credit is one that has gotten some attention but even then the changes were relatively small or made after Connecticut’s taxpayers paid out tens of millions of dollars in return for little or no benefit.
Case in point: Linda McMahon’s WWE received millions in public funds to subsidize its website development and television programming without having to increase their spending in any way. One year, when taxpayers dropped over $120 million in film tax credits, McMahon’s company received multi-million dollar tax credits for four of its ongoing operations.
Oh, and one last point. One of the major problems is that, in general, the state does not report who benefits from tax credit programs so it is impossible for the policy makers, the media or the public to even determine whether they are being fleeced.
A bill was introduced this past Legislative that would have required greater transparency when it comes to Connecticut’s tax credit programs. After heaving lobbying by the Malloy Administration the bill was pulled from consideration. Their argument? It would hurt business.
In summary, it’s great to see discussions are ongoing about the need to bring fairness to our income tax structure at the federal and state level.
A similar discussion is needed when it comes to our business tax system as well.
Politicians say they want to help middle-income families and small businesses. If they are serious they should be doing more to reform and bring fairness to our tax structure – in Washington and here at home in Connecticut.