The outcry from the business community following the passage of the new state budget was loud and clear—things need to change or large corporations might move out of the state. Now the head of the state’s largest business group says he will be sitting down with Gov. Dannel Malloy this week to try to solve the problems.
Joe Brennan, president and chief executive officer of the Connecticut Business and Industry (CBIA), says things are getting serious. “This is an unprecedented area and we are really, really concerned. It’s not just about the big corporations. It’s also about the small businesses that service the hundreds and hundreds of employees who work for these companies,” he said. “We hope to talk about potential remedies [to the new taxes on business] with the governor who has never been nothing but accommodating and gracious with us.”
The governor seems open. “It’s not over till it’s over,” the governor said last Thursday, the day after the close of session. “I don’t know when the legislature’s going to come back in. Obviously there’s a fair amount of work that I think the legislature thought they would have done last night — they don’t have that done.”
CBIA’s major objection is to the new “unitary tax.” It requires corporations to report all of their income—in every state—for tax purposes instead of just what was earned in Connecticut. That and extending the 20 percent sales tax means the new budget is balanced with more than $700 million in new taxes on corporations.
Brennan says he will seek to meet with legislative leaders as well. “I’d like to meet with the Speaker [of the House Brendan Sharkey], the Senate President Pro Tem [Marty Looney], the majority leaders and minorities leaders.”
There’s been some pushback on the corporations’ objections to the new business taxes. Former state Rep. Bill Cibes, budget chief under Lowell Weicker, penned an op-ed in the Hartford Courant saying in part, “…Businesses in Connecticut are not extremely highly taxed, as compared to businesses in other states…Perhaps we should be trumpeting the business-friendly tax climate in Connecticut, rather than tolerating fact-free rhetoric that our taxes on business are exorbitant.”
The advocacy group Voices for Children wrote, “A 2010 Voices brief analyzed Connecticut’s 37 largest for-profit companies, and found that 32 of these companies (86%) already operate in other states with mandatory combined reporting. 27 of these companies, including both GE and Aetna, operate in 5 or more states with mandatory combined reporting.
“Connecticut is the only state in the Northeast without mandatory combined reporting, allowing multistate corporations to use accounting loopholes to avoid taxes while local businesses foot the bill. Requiring large corporations to pay their fair share is beneficial not only for Connecticut’s bottom line, but makes sure all businesses in the state are treated equitably by our tax code.”
No matter what, the picture should be a little clearer by the end of the week.