CBIA: Lamont’s tax increase on business largest in a decade

Courtesy of Connecticut Business and Industry Association Connecticut Business and Industry Association CEO Chris DiPentima (left) questions Gov. Ned Lamont at a 2022 forum.

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By David Krechevsky

The Connecticut Business & Industry Association (CBIA) expressed surprise and disappointment Thursday with Gov. Ned Lamont’s proposed $55.2 billion biennial budget, saying it includes the largest tax increase on business in years.

The biennial budget released Wednesday by Lamont includes several proposals to reform corporate taxes that, overall, increase the burden on businesses by nearly $348 million over the next two years.

“That tax increase is probably the largest in a decade,” said Chris DiPentima, president and CEO of CBIA, the state’s largest business organization. “If you look back, most of the things we've been doing, especially under Gov. Lamont, have been tax decreasing.”

Rob Blanchard, Lamont's communications director, responded via email Thursday that the governor's budget does make an effort to "lift the burden' on businesses.

"(T)he Governor’s budget proposal actually repeals a tax on small and growing businesses that otherwise hinders their growth and ability to invest and hire Connecticut residents," Blanchard said. "This repeal benefits approximately 6,500 businesses. Larger companies will see the elimination of a tax preference that is unique to Connecticut and benefits fewer than 20 companies."

In addition, he said, Lamont's budget proposal seeks to lower the cost to hire and recruit more people by proposing to eliminate license fees for positions that include HVAC, plumbers, and electricians, "many of which, work for small businesses.

He added that, as part of a bond bill, the governor "included $50 million for defense manufacturers or their supplies to provide assistance and $25 million to support supply chains core to our major industries.”

Overall, Lamont’s budget proposes spending nearly $27 billion in the 2025-26 fiscal year, a 3.8% increase, followed by a 4.6% increase to $28.2 billion in the following fiscal year.

The governor’s budget also proposes revising the state’s volatility cap, which limits the amount the General Assembly can budget from the state’s most volatile revenue sources. The statute sets a cap that is adjusted annually, and any revenues raised above that threshold are transferred to the Budget Reserve Fund

That so-called fiscal guardrail has been supported by Lamont in the past, but in this budget plan, he proposes freeing up nearly $300 million per year more of the surplus to be spent on a new universal preschool endowment that would be exempt from the cap.

“The governor for several years has said he wants more taxpayers, not more taxes, and has really stood shoulder to shoulder with the business community and some other organizations to protect the guardrails,” DiPentima said. “And here, at the start of the budget conversation, he's opened up the door on both those things.”

He referred to Lamont’s State of the State address given on the opening day of the 2025 legislative session in January. He said the governor “challenged himself, his administration and all lawmakers to ‘look under the hood’ of the budget’” to find inefficient spending, or spending that isn't having the desired return on investment, and “redeploy those dollars.”

Now, DiPentima says, the governor is just spending more money.

“When you kind of just throw more revenue onto the budget, like he’s doing with the proposed changes to the volatility cap and kind of going around the spending cap with a surplus rollover, it really takes the pressure off of lawmakers to look at the current budget and see what's working, what's not working, and redeploy that to things like childcare or special education or Medicaid.” he said.

He added that, given the uncertainties with federal funding under the new administration in Washington, it would be prudent to stick with the guardrails and hold surpluses in reserve to be better able to deal with the financial unknowns.

He added that state spending is already high.

“I don't think a lot of people know, but Connecticut government spending is already the highest in the country, at just over $6,000 per capita, which is two times the national average,” he said, citing CBIA’s 2025 “Reimagine Connecticut” report, which cited data from the National Association of State Budget Officers. “The average in the country is about $3,000 per capita.”

Blanchard said Lamont has put the state in a sound financial position to deal with the unknown.

“Through careful fiscal discipline, the governor has built the largest Rainy Day fund in the state’s history, which will help protect taxpayers in the event of recessionary headwinds or economic uncertainty," he said. "Regardless of what Washington decides, childcare continues to be both a burdensome cost and something than can keep parents out of the workforce — something business leaders on the governor’s blue-ribbon commission on childcare would agree on."

Blanchard added that Lamont believes the commitment to "a transformative investment in our children is not only good policy for families, but economically sound too. In the meantime, we will continue to stay in close contact with Washington on the future of federal funding and adjust accordingly.”

DiPentima, however, stressed that the state should be relying on a 2021 study called The Connecticut CREATES Project that was produced at the request of the legislature.

“That report has $600 million to $900 million in suggested annual savings, with very specific things that government can do to free up those dollars that could then be used for child care and special-ed without the need to touch the guardrail,” DiPentima said.

House Bill 5574, “An Act Implementing the Recommendations of the CREATES Project Report,” has been raised by the legislature’s Government Oversight Committee and will be set for a public hearing. It proposes implementing the report’s recommendations, including exploring a deferred retirement option for police; privatizing fingerprinting services; managing workers’ compensation expenses; and digitizing state invoicing.

“Folks have been pretty quiet around the report the last two years. We continue to remind people of it,” DiPentima said.

Blanchard said the governor supports the recommendations in the report.

“While still a concept bill, a lot of the initiatives and ideas laid out in the original CREATES report are supported by the governor and have even been implemented already, such as measures to reduce cost and improve the quality of service state residents count on,” he said.