The Finance, Revenue and Bonding Committee heard testimony Monday about the impact the COVID-19 pandemic had on low-income workers in the state and why the state needs to increase taxes on the wealthy to help them.
“It’s not fair that some of the wealthiest in our state have so much, meanwhile, others have so many struggles,” Beryl Benson of New Haven told lawmakers Monday.
Benson said the inequality is not fair to the youth in New Haven who need more resources and opportunities. She said there are not enough extra curricular activities for children in New Haven.
Rev. Josh Pawlek told lawmakers that “austerity restrains recovery.”
Denise Weeks of Glastonbury, a member of the Recovery for All coalition, says the pandemic has seen many families on the margins struggling for survival “while others in the state were able to work from home and watch the value of their investments soar.”
She said the disparity between rich and poor in Connecticut is nothing new “but it has been exasperated and further exposed by the COVID pandemic.” She added that it’s up to the state to ensure those who have benefitted the most during the pandemic “bear their fair share of the cost of recovery.”
Sheldon Toubman, an attorney with New Haven Legal Assistance, says the two bills: HB 6187 and SB 821 are necessary because Gov. Ned Lamont has shown an “unwillingness to consider reasonable revenue options set forth in the bills before you,” and his budget makes cuts that will impact the most needy in the state.
The two bills are similar in what they’re asking the state to do.
They create a two percent statewide property tax on the portion of the market value of homes in excess of $1.5 million; reduce the estate tax exemption to $2 million, eliminate the payment cap, and enact estate tax rates similar to the rates in effect before the Great Recession; increase the base corporation business tax rate to 11.5% for corporations with gross income of $100 million or greater and extend the current surtax to 20 percent; impose a surtax of 5% on capital gains, dividends, and taxable interest for individuals with income in excess of $500,000 a year or $800,000 for joint filers. The bills also gives a one-time direct payment of $500 to those who have lost their jobs during the pandemic, doubles the maximum property tax credit and expands the earned income tax credit while extending it to undocumented workers.
“These aren’t ‘broad based’ tax increases. On the contrary, they are narrowly focused proposals that restore fairness to fund essential services and jumpstart economic recovery,” Sal Luciano, president of the AFL-CIO of Connecticut, said in written testimony.
The bills would also establish a 10% per tax on the annual gross revenues derived from digital advertising services in the state for any business with annual world-wide gross revenues exceeding $10 billion dollars. The language is meant to target media giants like Google, Facebook, and Amazon.
Chris Oswald, senior vice president for the Government Relations Association of National Advertisers said the tax poses a serious threat to small businesses.
“Advertising service providers can be expected to pass the tax onto their customers, including Connecticut brick and mortar businesses that seek to reach new customers online,” Oswald said in written testimony. ”A study by Deloitte Tax of the digital advertising tax adopted in France confirms this projected outcome. It found that 55 percent of that tax burden would be passed on to consumers who would pay higher prices for every good and service they use, online or offline.”
If Connecticut were to enact this tax on advertising, it would become the second state or locality in the United States to impose such a tax.
“These proposals are almost certainly violative of federal law and unconstitutional,” Oswald said.
Tim Phelan, president of the Connecticut Retail Merchants Association, also opposed the bills for the same reason.
He said in written testimony that brick and mortar retail stores in Connecticut have had to leverage new technologies and platforms to communicate with their customers and meet customer expectations for a personalized and seamless experience between mobile, online, and in-store shopping.
“No matter the INTENT of the sponsors, the impact WILL be felt by our members. What is aimed at the industry giants will find its way onto invoices in the accounts payable departments of Connecticut’s retail businesses. Make no mistake about that. And the timing could not be worse,” Phelan wrote.
A similar proposal to tax social media providers received bipartisan support earlier this month.