Connecticut’s business community made a last-ditch effort Monday to stop what they believe will be devastating tax increases with dire consequences.
General Electric, which is headquartered in Connecticut, didn’t mince words when it said the tax hikes that are part of the budget deal between Democratic leadership and Gov. Dannel P. Malloy will make businesses “seriously consider whether it makes any sense to continue to be located in this state.”
Rep. John Frey, R-Ridgefield, said he received a phone call Sunday afternoon from Jeff Bornstein, GE’s Chief Financial Officer, who told him the company was considering whether to move its corporate headquarters based on the information it was reading about the proposed tax package.
According to a spokesman for GE, they have 5,700 employees in Connecticut, but Frey suggested there’s a bigger, ancillary impact with respect to GE’s relationships with suppliers and vendors around the state.
“We’re talking 50,000 employees that are either directly or indirectly related to GE,” Frey told the Finance, Revenue and Bonding Committee on Monday. “That’s terrifying.”
Bornstein, according to Frey, has been in discussions with the Malloy administration, but if he had known how bad the tax package was going to be, he would have written an editorial.
Frey suggested he put out a statement and GE did.
“Retroactively raising taxes again on Connecticut’s residents, businesses and services makes businesses, including our own, and citizens seriously consider whether it makes any sense to continue to be located in this state, the statement from GE states. “The Connecticut economy continues to struggle as other states offer more opportunities and a better environment for business growth. It is essential that Governor Malloy and legislative leaders find a more prudent and responsible path forward for Connecticut and its citizens in their current budget negotiations.”
Aetna and Travelers also issued statements signaling they were open to moving parts of their operations out of Connecticut.
Frey said Bornstein’s comments reminded him of that “uh oh” moment a few years ago when United Technologies officials said “anywhere outside of Connecticut is low-cost.”
“We just cannot continue with this. I do not think this is an idle threat,” Frey said.
The new revenue numbers adopted as part of the budget include the establishment of a “unitary tax” that changes how multi-state corporations are taxed. It also maintains the 20-percent corporate surcharge, reduces by 50 percent the losses a business is able to carry forward, and it reduces the credits against certain taxes.
But Malloy, who campaigned on a pledge not to increase taxes, didn’t seem concerned.
“Let’s be very clear. Businesses, residents and the Connecticut economy lose billions — billions — of dollars of output each year because our transportation infrastructure needs a transformation, which this budget delivers,” Devon Puglia, a spokesman for Malloy, said. “The historic investments we’re making, the largest in the history of Connecticut — an additional $10 billion — are good for job creation, good for the economy, and good for businesses, GE included.”
But Republican lawmakers pointed out during the Finance Committee meeting Monday that the transfer from the general fund to the special transportation fund was reduced, at the same time as the budget used 0.5 percent of the sales tax to help fund transportation, essentially keeping funding level.
Rep. Chris Davis, R-East Windsor, said despite what may be included in press releases and discussed “we’re not truly increasing the funding to pay for these transportation projects because we are shifting the sales tax money and then not shifting general fund money as we previously would have.”
Rep. Jeffrey Berger, D-Waterbury, said that’s true in the first few years, but over the long run the money going toward transportation will increase.
The proposed budget increases taxes on corporations and businesses by nearly $282 million. The overall tax package increases taxes by about $720 million.
Joe Brennan, president and CEO of the Connecticut Business and Industry Association, called the budget proposal “unaffordable, unsustainable, and untimely.”
“Big increases in state spending combined with major tax increases on employers will undermine family income by making the state much less attractive for job growth,” Brennan said. “Whatever changes have been made to the tax proposals over the last few weeks do little to blunt the punitive nature of these tax hikes on the very businesses that we rely on for jobs.”
Brennan cited a three-fold increase in taxes on computer and data processing services as a direct threat to job creation. The tax would rise from 1 to 3 percent.
“Connecticut holds itself out as a technology state, an innovation state,” he said. “Why would we increase a tax on computer services, a tax that most other states don’t even have?”
Elizabeth Regan contributed to this report.