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April 23, 2021

Business community slams finance committee-endorsed tax hikes

Yehyun Kim | CT Mirror The state Capitol.

The Connecticut Business & Industry Association today decried a series of tax increases approved by the legislature’s Finance, Revenue and Bonding Committee on Thursday, arguing the new levies will only stunt Connecticut’s economic rebound from the COVID-19 pandemic at a time when the state’s coffers are not in urgent need of more cash.

“Small businesses will bear the brunt of many of these tax increases and it defies sensible logic that there are lawmakers who think further burdening struggling smaller employers is a positive for the state,” said CBIA President and CEO Chris DiPentima. “That’s the same illogical thinking that caused Connecticut to be near the bottom of the nation in recovery from the 2008-2009 recession.”

The Democrat-controlled finance committee approved several new taxes, including a highway use tax on large commercial trucks and a tax on digital ads intended to generate millions per year from large tech corporations such as Google and Facebook.

The panel also voted in favor of increasing taxes on those making over $500,000 a year and taxing marijuana for recreational use, should it eventually be legalized.

Various state business groups, including the CBIA and the Connecticut Retail Merchants Association, had spoken out against some of those tax hikes before they were adopted by the committee, particularly the digital ad tax, which they worry will inflate costs for small businesses if companies like Google and Facebook simply pass along the new expense to customers.

The issue has become increasingly fraught for brick-and-mortar retailers, many of whom have shifted their operations online in light of the pandemic and worry there will be no way to avoid paying higher advertising rates if the corporations that control most digital ad space demand it.

DiPentima said lawmakers who voted in favor of the tax increases are squandering an opportunity to make the state more attractive to businesses.

“New York has already hiked taxes on its residents and Massachusetts looks set to follow,” he said. “Why would we take away that competitive advantage, particularly when we have a healthy rainy day fund and significant federal relief funds?”

The finance committee paired its proposed tax increases with tax breaks for poor and middle class residents and a one-time bailout for the state’s battered restaurant industry worth nearly $50 million.

The panel’s plan also removes close to $1 billion from the limitations of the state budget’s spending cap, much to the consternation of Republicans, who called the move irresponsible.

Gov. Ned Lamont, who is more fiscally conservative than most of his fellow Democrats in the General Assembly, said Thursday that he would not support the committee’s plan. Moving funds outside of the spending cap, the governor said, is comparable to the sort of financial mismanagement that Connecticut has been trying to correct for decades.


 

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