(Updated 4:20 p.m.) Before jetting off to Europe for a trade show, Gov. Dannel P. Malloy proposed changes Friday to the tax package that narrowly won approval from the legislature last week despite objections from the state’s business community.
Outside his Capitol office, Malloy announced that he wants to keep the computer data processing tax at 1 percent, delay unitary reporting until January 1, 2016, eliminate the sales tax on car washes and parking, cap the tax on Internet downloads at 1 percent, and cap the amount of credits companies can use to offset their tax burden at 55 percent.
The business community — including large, iconic companies like GE, Aetna, and Travelers — complained loudly about the computer processing tax and the unitary reporting requirement.
The changes will mean the state will collect about $223.5 million less in revenue over two years, or $96.5 million in the first year and $127 million in the second year of the budget.
Additionally, Malloy said he will give the legislature the option to either cut 1.5 percent in spending from any line item, including municipal aid, or give him the authority to make the cuts.
Before his announcement, Malloy met with the Connecticut Business and Industry Association Friday morning to discuss the economic impact of the budget approved by the General Assembly on June 3.
“I took the time to hear from the business community and others,” Malloy said.
He said that after that conversation and others, he felt changes to the budget needed to be made. However, it’s unclear if the legislature will agree.
Malloy said the changes he proposed Friday were not negotiated with the General Assembly, so it’s unclear how they will be received.
The legislature plans to hold a special session to adopt language implementing the budget later this month.
House Speaker Brendan Sharkey and Senate President Martin Looney said they would take the proposed changes under advisement, but were unable to say Friday if they would agree to them.
“I think we’re still in the stage of digesting what the governor’s proposing,” Sharkey said.
Asked if he thought Malloy undercut them by calling for a press conference to announce changes, just one hour before their press conference to defend the budget, Sharkey said he doesn’t think it undercuts their message.
“The message is still the same and the governor said that at his press conference,” Sharkey said. “This is a great budget. This is a transformational budget. It’s a budget that doubles down and makes sure we’re addressing the key issues that affect our economic vitality in the state: property taxes and transportation.”
Looney said the fundamental pillars of their budget are the changes to the property tax structure and using half a percent of the sales tax to fund improvements to the state’s transportation infrastructure.
Pressed about whether they would accept the governor’s changes, Senate Majority Leader Bob Duff told reporters they were asking for the conclusion of the story when they haven’t even opened the book yet.
“I think we need to adjust what the governor’s proposed and we need to figure out what the way forward is,” Duff said.
Looney said there might be some agreement to delay implementation of unitary reporting, but “I personally think the unitary tax was one of the most important elements of the budget.”
He said it puts Connecticut in the mainstream of the states in the region that already require unitary reporting.
Sen. Kevin Witkos, R-Canton, who was standing in the back of the room while Democrats held their press conference, said he would like Malloy to veto the budget.
“Trying to fix a $40-plus billion budget through implementers is not the way we should be implementing tax policies in the state,” Witkos said. “We’d stand behind the governor’s veto 110 percent.”
Malloy has not received the budget yet and declined Friday to say exactly what he will do when he gets it. He will have 15 days from the time he gets it to make a decision.
Joe Brennan, president and CEO of the Connecticut Business and Industry Association, said he was pleased the governor agreed to open up discussions on the budget. He said he was also glad the governor acknowledged the need to reduce the level of spending and begin to look at the state delivering services more effectively.
“We were pleased the governor listened to the good men and women who create and want to keep jobs here in this state,” Brennan said.
After the state budget was passed, Fairfield-based General Electric said it was considering taking its business elsewhere. And this week Indiana’s Republican governor took out a full-page ad in the Wall Street Journal to let Connecticut companies — like GE, Aetna, and Travelers — know they won’t find the same taxes in the Hoosier state.
Brennan said that’s in addition to the outcry from small and medium-size business owners.
Meanwhile, the state’s largest municipal lobby said the conversation about policy is less of an issue than the process.
Joe DeLong, executive director of the Connecticut Conference of Municipalities, said municipal leaders didn’t have a seat at the table in developing the municipal tax relief proposal that’s included in the budget.
“They just kept telling us: ‘Don’t worry, you’re going to like it’,” DeLong said Friday.
He said they like the concept of municipal tax relief, but would like to be included in the discussions. He suggested that maybe if the Democrat-controlled legislature and governor were more inclusive and less divisive there wouldn’t be this much backlash against the budget.