A bill to tax Troubled Asset Relief Program bonuses may be headed for a veto, but that didn’t stop the Senate from debating it and passing it 21 to 14 Friday evening.
The revenue levied by the bonuses will be used to help eliminate the $250 business entity tax for about a third of small businesses in the state, which is why the legislature’s Democratic majority have called it their “jobs” bill.
Sen. Majority Leader Martin Looney, D-New Haven, said the bonus “surcharge” is entirely equitable because it provides relief for small businesses.
“This is a way of bringing attention to those businesses that need help in Connecticut,” he concluded.
Sen. President Donald Williams, D-Brooklyn, said the bill includes a temporary, two-year, 2.5 or 3 percent surcharge on bonuses. “This is not a punishment, this is not passing judgment,” Williams said.
It’s still unclear how many residents in Connecticut may have received the bonuses under the federal governments bank bailout.
Sen. Leonard Fasano, R-North Haven, questioned the constitutionality of the tax, which targets a specific population of residents who work in a specific industry.
Sen. Minority Leader John McKinney, R-Southport, reminded his colleagues that “in Connecticut the financial services industry is the goose laying the golden egg.” He said targeting taxes on that specific population will drive them out of the state to places like New York or New Jersey.
Sen. Andrew Roraback, R-Goshen, wondered why they were even debating the bill since Gov. M. Jodi Rell has already said she would veto it.
In a March 24 letter to lawmakers Rell said she has read Attorney General Richard Blumenthal’s opinion stating that the tax was ‘likely constitutional’ and would veto the bill in its current form because there’s just too many uncertainties surrounding the tax.
The initial bill was based on bonuses of $1 million or more, but an amendment Friday lowered it to $500,000. When the tax was on bonuses of $1 million or more the Office of Fiscal Analysis estimated that it would bring in $2. 8 million in 2011 and $4. 7 million in 2012. Eliminating the business entity tax for 48,000 businesses would cost the state $12 million per year, leaving the state with a net revenue loss if it implemented the bill.
However, the adjustment of the bonus down to $500,000 didn’t bring anymore clarity to the bill.
After the bonus amount was lowered, the Office of Fiscal Analysis was unable to determine how much revenue the state would realize from the tax.
“This results in a General Fund revenue gain, the amount of which cannot be determined due to a lack of available data on bonuses paid to relevant employees in this amount.”
The vote in the Senate was not along party lines. Sen. Bob Duff, D-Norwalk, said he was concerned about the constitutionality of the tax and the implementation.