Rell vetoes TARP bonus tax

Governor M. Jodi Rell vetoed legislation passed by the Connecticut General Assembly that would have exempted the smallest businesses from an automatic $250 tax the state levies on small businesses, while taxing bonuses paid to executives at financial companies that received federal bailouts.

In a prepared statement, Rell said she agrees such bonuses are inappropriate, but said the bill would trigger a long, costly and potentially unsuccessful legal battle; and that the revenue gained from the bonus tax would not offset money lost in eliminating the business entity tax.

If enacted, the law would impose a nearly 9 percent tax on bonuses in excess of $500,000 paid to executives of companies that received funds under the federal Troubled Asset Relief Program. The $250 business entity tax would be eliminated for companies with less than $50,000 in net income.

“The law does not permit us to target individuals with punitive taxes,” Rell said. “Many legal experts have warned that this legislation would certainly be challenged as exactly that.”

Democrats wield sufficient votes to override any veto by the Republican Rell. Party leaders did not immediately state whether they would seek an override.