Business group cool to state panel’s ‘payroll tax’ recommendation

By Brian Hallenbeck,

New London — Members of a panel charged with recommending ways to turn around Connecticut’s economy are scheduled to address business leaders Wednesday at “Connecticut Business Day” in Hartford.

Not everything they’ll be pitching is apt to earn applause.

In a meeting Monday with The Day’s editorial board, a Connecticut Business and Industry Association official indicated the trade group is wary of a recommendation calling for the imposition of a corporate payroll tax starting in the 2019-20 fiscal year. The 0.8 percent tax would be imposed on company payrolls, with a full exemption for the first nine employees and a half-credit exemption for the next 10 through 99 employees.

The tax could generate about $475 million, the Commission on Fiscal Stability and Economic Growth estimates.

Brian Flaherty, CBIA's senior vice president for public policy, noted that Connecticut, a state struggling to compete with neighboring states, is the only state considering a payroll tax on businesses and that such a tax doesn’t fluctuate with changes in how a business is performing.

“Our biggest concern is the payroll tax,” Flaherty said, adding that other tax reforms proposed by the commission could benefit small businesses.

The commission recommends a dramatic, phased-in reduction in the state’s personal income tax over three years, starting in fiscal 2020. The rate would be reduced by 18 percent (from 6.99 to 5.75 percent) for the top income bracket, by similar or greater amounts for lower brackets, and to zero for incomes below $10,000. The commission would partially offset the resulting reduction in income tax revenue by increasing the state sales tax from 6.35 to 7.25 percent. It also would eliminate estate and gift taxes.

Commission Co-Chairmen James Smith, former chief executive officer of Webster Bank, and Robert Patricelli, former CEO of Women’s Health USA, will talk about the recommendations at Wednesday’s event, which will run from 9 a.m. to noon at the Legislative Office Building. Joe Brennan, the CBIA president and CEO, and Gov. Dannel P. Malloy also are expected to speak.

Flaherty said the CBIA supports the concept of a dedicated fund for transportation improvements, careful study of the re-introduction of tolls on state highways and legislation expanding the role of the Connecticut Port Authority, which oversees the state’s maritime economy.

Jobs and workforce development remain the CBIA’s main focus, Flaherty said.

He cited a state Department of Labor report last week showing that Connecticut manufacturers added 6,300 positions last year, the sector’s largest gain in more than 30 years. An estimated 13,000 manufacturing jobs will still need to be filled in the near future.