On April 12, the Connecticut General Assembly”™s Finance Committee voted in favor of a bill introduced by Comptroller Kevin Lembo that aims to foster greater transparency around state incentive programs and tax credits.
House Bill 6566, “An Act Concerning Transparency in Economic Assistance Programs,” now moves to the full General Assembly despite broad criticism by the business community and state economic development officials that the proposal is fraught with redundancies and would require disclosures that would be harmful to businesses.
The bill calls for the state departments of Economic and Community Development (DECD) and Revenue Services to create and maintain a publicly accessible online database with information on all state tax credit and business assistance programs.
Additionally, companies would be required to report any tax credits they claim, with the information then subject to public disclosure.
The Business Journal is supportive of the principles behind this proposal and believes that if it were passed it would accomplish a great deal in the way of transparency.
We would echo Abraham Scarr, director of the Connecticut Public Interest Research Group, who in public testimony said, “Tax incentives and other economic assistance programs use public resources just as government spending programs do, and deserve the same level of transparency.”
While the DECD and other state agencies may already report on economic development and incentive programs, there is no reason for tax credits not to be treated in the same manner. Tax credits, like incentives, ultimately lower the public coffers, and taxpayers deserve to know their collective impact.
However, the opposition is valid in arguing that the bill would put Connecticut businesses ”” already burdened under the existing tax regime ”” at a disadvantage relative to competitors, both within and outside Connecticut”™s borders.
To quote the testimony of Bonnie Stewart, vice president of government affairs for the Connecticut Business & Industry Association: “Companies do not normally share information about how much money they are spending on research and development or investing in fixed capital; to do so would put them at a competitive disadvantage.
“It is too easy to take a company”™s tax credit information and work backward to compute an individual company”™s hiring, investments, R&D and more. Connecticut companies compete every day against others that are not bound by such disclosure rules.”
So while we support the passage of HB 6566, we do so with a caveat: Efforts to cut state spending and to lower the state”™s corporate tax burden must be genuine.
To offset the competitive disadvantages this bill could very well bring about, it”™s vital that the governor and the legislature begin to give these twin concepts of lower spending and tax relief more than just lip service.
