A bill that would allow the state to tax Troubled Asset Relief Program bonuses and eliminate the $250 business entity tax for 48,000 small businesses made it through the Finance, Revenue, and Bonding Committee Thursday.
Sen. Toni Boucher, a Republican from Wilton, called the bill the most “controversial” the committee has seen this year and argued that the tax on TARP bonuses was probably unconstitutional.
“You’re targeting a very specific group of people,” Boucher said.
Sen. Eileen Daily, co-chairwoman of the committee, said she feels comfortable with the Attorney General’s opinion, which said it was “likely constitutional.” She said it’s sufficient because there is a direct public policy benefit.
Sen. Andrew Roraback, a Republican from Goshen, said he thinks the Democratic leadership is on thin ice believing the bill would pass constitutional muster.
The bill’s main proponent, Sen. President Donald Williams, a Democrat from Brooklyn, had hoped the surcharge on the TARP bonuses would help eliminate the $250 business entity tax paid by small businesses that bring in less than $50,000 in profit. However, the fiscal note compiled by the nonpartisan Office of Fiscal Analysis, concluded that the 8.97 percent tax on bonuses over $1 million would only bring in $2.7 million in 2010 and $4.8 million in 2011.
The fiscal notes says that according to information compiled by the New York Attorney General fewer than 100 Connecticut employees received bonuses in excess of $1 million.
This means there isn’t enough money to help eliminate $12 million of the $31.3 million in business entity tax collections.
But Rep. Cameron Staples, co-chairman of the Finance Committee, said he isn’t concerned about the numbers balancing out at this point. He said it’s likely the concept, passed 31 to 17, by the committee Thursday will become part of the bigger budget resolution.
“It’s about moving ideas regarding job creation forward,” Staples said.
He said the concepts in the bill could be merged at some point with other similar legislation making its way through the process.
As far as putting together a bigger tax package to complement the spending package put together last week by the Democrat-controlled Appropriations Committee, “we’re talking about our options,” Staples said.
He said this year is unusual in many ways. He said instead of compiling a formal package to balance the $350 million increase in spending proposed by the Appropriations Committee, the Finance Committee may put together a menu of options that includes things like the hospital tax and the estate tax reduction.
He said once the deficit mitigation package is passed the committee will have a better idea of where it needs to find revenue.
And what about the $1.3 billion revenue stream the legislature is tasked with identifying?
Staples said the caucus is still discussing it and considering its options.