Last year state and local business taxes made up only 3.3 percent of Connecticut’s private sector economic activity, making it the state with the lowest business tax burden in the country, according to a report by the Council on State Taxation.
The Washington D.C. – based nonprofit compared the corporation business tax among states along with a host of other taxes that impact businesses including property taxes, sales taxes on business inputs, and unemployment insurance as well as others.
It found that Connecticut ranked at the bottom of the country for tax burdens on businesses, well below the national average of 5 percent of private sector activity.
In a summary of the report the nonprofit think tank Connecticut Voices for Children said the findings were evidence that business taxes are not the root of the state’s persistently high unemployment rate.
“The point we’re trying to make with this report is you hear all this talk about Connecticut having the highest taxes on businesses. It’s unfounded if you look at it,” said Wade Gibson, a senior policy fellow for the group.
Peter Gioia, vice president and economist of the Connecticut Business and Industry Associations, said the study ignores much of what makes the cost of doing business in the state so high.
Many of the tax figures used had to be estimated, he said, but added that taxes are only one of many avenues one should look at when comparing business costs between states. He said the COST report even includes a caveat, saying it should not be used for comparative purposes.
Numerous other studies, some conducted by Moody’s and the Business Council of New York, consistently paint the cost of doing business in Connecticut higher than the national average by no small measure, he said.
“When I look at what affects businesses taxes are one element but there are multiple elements involved,” he said
On that point at least he and Gibson agreed. Finding ways to relieve businesses of taxes is not the way to create more jobs, Gibson said.
The high cost of energy, healthcare and transportation factor more heavily into the operating cost of the average business, he said.
Gibson is hoping Gov. Dannel P. Malloy and the legislature will use an upcoming special legislative session aimed at improving job growth in Connecticut, to address those issues rather continue to look for ways to cut taxes on businesses.
“For many years, Connecticut’s economic development efforts have been heavily focused on tax subsidies for big businesses,” he said. “In light of 20 years of anemic job creation, this study suggests that strategy is misguided.”
His comments come the same month Malloy added sports broadcaster ESPN as the third company in his “First Five” program, in which the state offers tax incentive and loans to companies promising to create at least 200 jobs.
On Thursday Gibson said he supports Malloy’s program.
“It’s a good first step in the short term to help get us out of a recession,” he said.
But it doesn’t address those other factors that do more to drive the cost of doing up business in Connecticut.
“What we would like the governor to do is take a look at Connecticut’s economic situation and ask how we can fix these structural issues to create job growth,” he said.
“[First Five] is helpful in the short term but the jobs special session is a great opportunity for long term planning to fix the economy.”
Malloy’s spokeswoman Colleen Flanagan said the governor has been approached by a number of people with different ideas on to help encourage job growth, which remains his number one priority. The agenda for the special session has yet to be finalized, she said.