January 14, 2019

Major policies opposed by businesses loom in Democrat-controlled legislature

HBJ Photo | Steve Laschever
HBJ Photo | Steve Laschever
State Rep. Josh Elliott (D-Hamden) is a grocery store manager/owner and also one of the major influencers in the House's growing Progressive Caucus.
Photo | Contributed
CBIA President and CEO Joe Brennan speaks at a recent economic summit, in which he and others discussed challenges and opportunities facing the state.
Andrew Markowski, State Director, National Federation of Independent Business (NFIB)
Themis Klarides, GOP House Minority Leader
HBJ Photo | Steve Laschever
Rep. Josh Elliott (D-Hamden), pictured here in one of two markets he runs, has been a key organizer of the Progressive Caucus in the state House of Representatives. In the 2019 legislative session, the Hamden Democrat thinks that work is going to bear fruit.

A regressive tax system?

When Rep. Josh Elliott (D-Hamden) calls Connecticut's tax system regressive, it's not just an opinion.

The Democrat is citing a 2014 report by the state's own tax department, that uses a scoring method called the Suits Index to measure the impact of Connecticut's nine major state and local taxes. The Department of Revenue Services concluded the overall impact of those taxes on households in the state is "slightly regressive."

That means the percentage of a household's income paid in those taxes decreases as income grows. Though individually some taxes, like the income tax, are progressive, others, like the property tax, are not. Connecticut is far from alone in having a regressive tax system, and it's actually pretty average, according to the Institute on Taxation and Economic Policy, a left-leaning think tank.

ITEP's 2018 ranking of tax equity found that 45 of 50 states have regressive tax systems. ITEP ranks Connecticut as the 29th most regressive.

With what's been deemed a regressive tax system, wide income disparities and an eroding middle class, Connecticut is an increasingly tough place for a common person to build wealth and climb society's slippery mobility ladder, according to state Rep. Joshua Elliott.

Those challenges, which aren't unique to Connecticut, are part of what drives the Hamden Democrat, who hopes to chip away at them this legislative session by pushing his party as far to the political left as possible.

"We've come into this paradigm where people confuse how the stock market does and how good our GDP is with how well the economy is doing," Elliott, 34, said in a recent interview at Thyme & Season, a Hamden health and food market he manages. "We hear news about how good things are, but in our pocketbook, we still feel it's tighter than it's ever been."

The law school graduate and co-owner of a second, similar market in Shelton was reelected to a second term in November. He drew his fair share of headlines for a freshman legislator, openly discussing his own after-hours marijuana use, and jousting with business interests, Republicans, and even fellow Democrats he deemed not sufficiently on board with what he views as non-negotiable pieces of the party platform.

That includes support for a $15 minimum wage (or higher, if possible) and creating a paid family medical leave program for private employees, actions that could impact the bottom line of his and other businesses, which is why employer lobbying groups have fought both policies in recent years.

Companies with a stake in the horse trading at the state Capitol may not be all that familiar with Elliott, but as the 2019 legislative session kicks into gear, his name will likely become more prevalent. He could be one of the main foils for the Connecticut Business & Industry Association and other groups that represent employers.

His work over the past two years helping organize a coalition of progressive Democrats has proven fortuitous following November's election, which saw the party widen its lead in the House, retake a healthy margin in the formerly split Senate and send another one of its own, Ned Lamont, to the governor's office.

Claiming approximately 45 members and another dozen or so that might soon join, the House's Progressive Caucus, which was officially revived last spring, is ready to test out its newfound clout.

"Because we have such large numbers within the Democratic caucus, we can have more strength," Elliott said. "I'm definitely excited."

Several key Democratic and progressive policy initiatives defeated by Republican and employer opposition in 2018 and 2017 now appear poised to pass this year.

That includes increasing the state's $10.10 hourly minimum wage and creating an insurance program, funded by a surcharge on worker pay, to ensure employees are paid some or all of their salary if they need time off to have a child, recover from an illness or help care for an ailing loved one.

Polls have shown that both policies are popular with Connecticut voters by fairly wide margins.

"Minimum wage and paid family medical leave will in some form pass [this session]," Elliott predicted. "It just so happens that we have a Democratic governor that will make, for the next two or four years, passing some of these laws a lot easier." (Lamont has said he supports both policies.)

Another hot-button issue the Progressive Caucus will push is a tax increase on the wealthy, Elliott said.

He thinks the state personal income tax, which is progressive, is the only realistic vehicle through which lawmakers can offset the regressive state sales tax and local property taxes.

How that plays out in budget talks remains to be seen. Lamont, a telecom entrepreneur, has pledged not to raise income or sales tax rates, and following a tax hike in 2015, corporate interests that decried a deteriorating business climate have successfully scared lawmakers, including Democrats, into closing deficits through other methods.

The Democratic governor will face pressure from the Progressive Caucus, which is led by co-chair Rep. Joshua Hall of Hartford and whomever replaces Rep. James Albis, an eight-year House veteran who recently accepted a Lamont administration job, to legislate from the left.

(Albis' replacement may or may not be Elliott, who says he's satisfied to "rabble rouse" for the caucus without a formal title.)

Other Democratic priorities in Connecticut this session are expected to include legalizing recreational pot use and sports betting, and authorizing highway tolls, though Lamont has said he only supports limited tolling.

Biz groups, GOP survey new landscape

Business groups that successfully fought off a minimum wage hike and paid leave over the past two years are casting a wary eye on the newly begun legislative session.

"There's definitely some apprehension," said Andrew Markowski, state director for the National Federation of Independent Business (NFIB).

Connecticut's minimum wage has fallen behind much of New England, but Markowski noted that the state's economic growth has also lagged, making it the wrong time to pass new employer mandates.

Last week, Republicans criticized the two proposed employer mandates, saying they would "curtail economic expansion and stifle job growth."

Still, the GOP's House leadership suggested there's room for compromise.

"It's not like it's something we're unequivocally against," House Minority Leader Themis Klarides (R-Derby) said of a higher minimum wage.

For example, her members may push for exemptions from the higher minimum wage for younger, part-time workers.

Connecticut Business & Industry Association CEO Joe Brennan is well aware of Democrats' increased power, but he said he's not ready to concede 2019 anytime soon. Months remain to influence legislators, many of whom he thinks agree that growing Connecticut's economy is one of the best ways to escape the state's fiscal problems.

"At the end of the day, when we get to (the end of the legislative session), it may be that certain things pass, but it's not like everything's a fait accompli," Brennan said.

For example, CBIA could push for a lower increase or longer phase-in of a higher minimum wage, and less generous benefit caps for a paid family medical leave program.

Markowski said he is hopeful that Lamont's business background will serve to moderate the legislature's more progressive urges.

Opponents have argued a higher minimum wage would force companies to lay off workers, slow investment, raise the prices of goods or services, and raise wages for employees already at or near $15 an hour in order to compensate for the new wage floor.

Some studies in recent years have countered opponents' claims, giving ammunition to Democrats and the Connecticut Low Wage Advisory Board, which concluded in 2016 that "the weight of the credible economic research" shows that raising the minimum wage will mean higher pay for employees and some benefits for employers, including reduced turnover, higher productivity and increased consumer spending.

Markowski said a wage hike would disproportionately impact smaller companies, and Elliott agrees, though he views the issue differently.

"The pain is going to be felt by people like me first — people that own small businesses of 50 employees or less, or people in the retail sector or service sector," Elliot said.

However, he believes the pain will level off eventually and the wage hike will help the economy.

As for paid leave, employers argue it presents an administrative burden and the potential for employees to abuse the benefit.

Advocates agree that program design matters, but say paid leave is working well in other states.

Big picture

Besides finding ways to grow the state's economy, one of employers' major desires this legislative session is for lawmakers to shun last-minute or superficial budget patches that all but guarantee future deficits, increasing the chances for unexpected tax hikes or other changes.

Lamont has said forging a gimmickless, balanced budget that addresses long-standing structural problems is a top priority.

Brennan said if Lamont falls short this year on his budget pledge, it could have a chilling effect on employer perceptions. Further complicating matters is the $3 billion-plus budget hole that must be closed over the next two fiscal years.

"He's got a delicate thing he's got to do with his first budget. He can't blow up the system, but on the other hand, he can't make it look like business as usual either," Brennan said.

And given his dual identities as a businessman and self-described progressive, Lamont could find himself at the center of a game of tug of war between liberal legislators and employers seeking his favor or protection, Elliott said.

He's curious to see how Lamont's inclusive style plays out when interests inevitably clash during the budget process.

"I don't think he wants to be disliked," Elliott said. "But you can't be liked and manage the state. There are people you are going to have to piss off over and over again."

It's during those moments, Elliott thinks, that Connecticut will learn more about its new governor.

Read more

A briefer on CT's min. wage and paid leave

Correction: This story gave an incorrect name for the business Elliott runs in Hamden. It is Thyme & Season, not Season & Thyme.

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