Lobbyists and state officials spoke out against a bill that would enact new mechanisms to ensure transparency around Connecticut”™s business assistance programs at a March 11 hearing, calling the measure redundant and harmful to business.
The proposal, An Act Concerning Transparency in Economic Assistance Programs, was submitted by Comptroller Kevin Lembo.
It calls for the state Department of Economic and Community Development (DECD) 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, and the state Department of Revenue Services (DRS) would be required to produce a biennial tax incidence analysis report for the purpose of showing the distribution of the state”™s tax revenues.
Lembo said the online database would allow the public to review the scope of the state”™s business assistance programs and allow for a comparison of the programs”™ anticipated results versus their actual outcomes.
“Providing this information to the public will, over the long term, improve the state”™s investment strategy,” Lembo said in March 11 remarks delivered to the General Assembly”™s Finance Committee. “Programs that are working will have accessible data to reinforce their value and programs that do not can be identified and the funds repurposed toward more productive uses.”
However, representatives of the DECD, DRS and of the Connecticut Business & Industry Association (CBIA) said the bill would have a negative impact on business and that its requirements would result in significantly higher administrative burdens for the affected state agencies.
There are already laws that allow for “a full analysis of tax credits, including their job and revenue impacts,” said Bonnie Stewart, vice president of government affairs for the CBIA, in prepared remarks delivered at the hearing. “Requiring the additional disclosure of individual company tax credit information does not add anything to that policy analysis and can be incredibly harmful to Connecticut companies.”
Stewart said companies ordinarily would not share information about how much money they spend on research and development or on fixed capital investments. She argued that capital investments and R&D expenditures could be discerned by competitors if businesses were forced to disclose all tax credit claims.
“Connecticut should not put its companies in harm”™s way by requiring such unnecessary disclosure,” Stewart said, adding that companies only qualify for tax credits “after performing the specific action encouraged by the General Assembly.”
DECD Commissioner Catherine Smith said in her remarks that the agency supports transparency and has begun to discuss the creation of a searchable format for its annual report.
But she said the requirement to disclose the economic benefits derived from each project assisted by the state “would create a competitive disadvantage for the state in its negotiations with existing companies within Connecticut and with any new companies that may consider relocating to the state.”
Both Smith and DRS Commissioner Kevin Sullivan said the additional reporting requirements of their respective agencies would not be possible unless their agencies were given additional resources and funding.
“IF DRS had the resources to do tax incidence analysis, we would already be doing it,” Sullivan said. “This will require half a million dollars or more (in) new funding either for staff and software licensing or for consulting expenses.”
