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Feeling portions of the Democratic tax package had received too little media attention, the Connecticut Business and Industry Association held a press conference Monday to talk about how devastating the reduction in the research and development tax credit would be on the state’s economy.

As part of the largest tax increase in history, Democratic lawmakers have proposed reducing the research and development tax credit from 70 percent to 50 percent.

Gary Miner, director of state and local government affairs for United Technologies Corp., said the company does $2 billion of its $3.5 billion in research and development right here in Connecticut.

In 2000, UTC relocated 1,500 engineers to Connecticut, he said.

“The tax credit was a consideration when we made those moves,” Miner said. “The further reduction and the limitations of our ability to use these tax credit is a disincentive for businesses to expand, remain, or even come to the state.”

In the biopharmaceutical industry, Paul Pescatello, president and CEO of CURE, said it takes about $800 million to $1.2 billion to bring a medicine from an idea to a marketed product. He said those dollars are spent over a period of 12 to 15 years and almost all of it is related to research and development.

“Building a business especially in biopharma really is about a lot of hard choices,” Pescatello said. “Government is about choices too. Choosing to disincent research and development at a time when we need it more than ever, when our future depends on it, is a choice we can’t afford.”

Carole Bilson, vice president of global design and usability for Pitney Bowes, said the company spent about $200 million in research and development last year. “The reality is that decisions about where to invent and how to invent are no longer left to chance,” Bilson said.

Connecticut does not compete just against Massachusetts or New York, but against Shanghai, Mumbai, Dusseldorf, and Toronto, Bilson said.

“This tax credit is an investment for the state, not a corporate giveaway,” Bilson said.

John Rathgeber, president and CEO of the Connecticut Business and Industry Association, said companies have told him in private that they will change their investment strategy if the state goes through with the reduction in tax credits.

But Rathgeber was not prepared to say what tax should be raised in order to preserve the research and development tax credit. “I don’t think I’m prepared to say what taxes should be raised until we see some serious efforts of actually implementing cuts in state spending to again make our state less expensive, more efficient and more effective,” he said.
“We’ve talked a lot about spending cuts,” Rathgeber said. He said there’s ways to consolidate state services. He said he also appreciates the potential $700 million in union concessions the state will realize if the 31 bargaining groups agree to the deal craft by union leaders and Gov. M. Jodi Rell.

On April 17 the co-chairs of the Finance, Revenue, and Bonding Committee, responded to criticism of their tax package including the 30 percent increase in corporate income taxes.

Rep. Cameron Staples, D-New Haven, said business leaders told lawmakers not do anything to hurt the research and development credits or eliminate certain sales tax exemptions, but the state is facing a close to $9 billion budget deficit. And when Rell presented her budget on Feb. 4, she closed a $6 billion gap without tax increases, not the $7.95 billion or $8.7 billion budget deficit being estimated by analysts. 

“It’s very easy to criticize, but what’s the alternative?” Staples has said.

He said companies would not be losing their research and development tax credits, they would just be spread out so that a company couldn’t take anymore than 50 percent of the tax credits in one year.

Two-thirds of tax package can be attributed to an income tax increase on the wealthy, Staples said.