When New York Gov. David Paterson revealed his tax-laden budget last month, it appeared Fairfield County might gain the upper hand in luring companies across the border ”“ for a New York minute, anyway.
Even as Empire State businesses and residents swooned over tax increases in Paterson”™s budget, Gov. M. Jodi Rell lambasted Connecticut Democrats for their own plan that “almost defies description” in Rell”™s words, including tax increases she termed “astonishing.”
With Democrats packing a veto-proof majority, Rell will need to sway at least a few members of the opposite party to defeat the plan. Her own budget relies on an overhaul of state government agencies; increases in fees charged businesses; and additional revenue she claims the state can pocket from a range of sources it has yet to tap.
Fairfield County has benefited from multiple relocations of New York companies in the past few months, most prominently the Blue Sky Studios Inc. animation studio now based in Greenwich.
Local companies are now contemplating a Democrat-proposed 30 percent hike in Connecticut”™s corporate tax over the next three years; the elimination of some tax credits that reward corporate investments; and the elimination of some tax exemptions. The corporate and sales-tax measures alone would cost businesses $475 million, according to the Connecticut Office of Fiscal Analysis.
The bills would repeal sales tax exemptions on a wide range of equipment and services, from vehicles and manufacturing equipment to telecommunications and market research services used for new product development.
Democrats also propose raising individual income taxes on joint filers with more than $250,000 in annual, taxable income, and single filers with more than $132,500 in earnings. Taxes would rise from the current flat rate of 5 percent to a sliding scale of between 6 percent and just under 8 percent.
That would have a direct impact on small businesses in Connecticut that pay income taxes by filing individual returns rather than corporate returns, according to Bonnie Stewart, vice president of government affairs for the Hartford-based Connecticut Business & Industry Association, which has 10,000 members statewide.
The Assembly also proposes slapping a 30 percent surcharge on estate bequeathals and gifts over $2 million in value.
The bill would also suspend planned retail sales-tax “holidays” on apparel purchases, currently scheduled for this August and in 2010.
“They don”™t get it,” Rell said in a statement. “They want what they want, and they”™ll raise taxes by the billions to get it ”¦ This spending and tax package will set our economy back even further. It will chase businesses and jobs out of the state. It will raise taxes $1,000 annually for every Connecticut resident. That”™s not economic recovery; it”™s economic disaster.”
In response, state Senate President Donald Williams said Rell did not immediately respond to his request in early April for budget negotiations and blasted the governor, saying, “We have worked hard to bring in the budget three weeks early and it will be balanced and it will make the tough choices that she failed to make. We have continually reached out to her and she has continually attacked us and this does nothing to help families who are suffering from this financial crisis.”
Even if the Connecticut General Assembly ultimately limits tax increases at a palatable level for companies and residents here, the very willingness to hike taxes sends a signal to employers considering their relocation options, CBIA has long maintained. CBIA is holding a pair of forums next month, including an economic update on May 12 in Berlin and its annual review of Connecticut”™s tax code two days later in Rocky Hill.
