Business executives to legislature: Make economic growth Connecticut’s top issue

By Stephen Singer

A retired business executive who helped draw up a plan last year for Connecticut to fix its broken finances and boost the economy urged state legislators Wednesday to put economic growth at the top of its agenda as they draft a two-year budget.

Bob Patricelli, a one-time health care executive and former co-chairman of the now-disbanded Commission on Fiscal Stability and Economic Growth, said a tax-and-spending proposal he’s backing, which is an alternative to Gov. Ned Lamont’s budget, would modernize Connecticut’s tax code and “re-ignite economic growth” in the state.

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“Connecticut has had negative growth for the last 11 years, in shocking contrast to the states around us,” Patricelli told the General Assembly’s finance committee. “Growth is the central goal that should unite us all — moderates, liberals, conservatives — because without growth our state is surely in deep trouble. Without growth, we cannot invest in programs and infrastructure.”

However, numerous opponents rapped the budget plan for its proposal to apply Connecticut’s 6.35 percent sales tax to a range of services.

Patricelli urged lawmakers to repeal gift and estate taxes and reduce and modernize some business taxes that can be used to make the state more attractive for business growth.

“These two are the highest priority growth drivers,” he said.

Patricelli said gift and estate taxes are responsible for prodding many business owners and high net worth residents to leave Connecticut.

The changes would cost $225 million, which Patricelli said could be replaced by broadening the sales tax to services currently not taxed.

“Some people won’t like the idea of raising sales tax revenue by expanding the base, even modestly," Patricelli said. "Others won’t like repealing the gift and estate taxes, arguing the wealthy should pay more regardless of the impact on the state’s competitiveness. But I ask you, ‘Can we put aside those conventional reactions?’ ”

Dozens of opponents to broadening the sales tax spelled out their objections in testimony to the committee. Many business owners and professionals such as massage therapists, owners of camp sites, the construction industry and others opposed the extension of the sales tax.

The Connecticut Business & Industry Association, the state’s largest business advocacy group, urged the legislature to “do more to cut state spending, rather than relying on tax and fee increases.”

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And Paul J. Knierim, probate court administrator, said repealing the estate tax would result in a $17 million drop annually in probate fee revenue. Repeal of the gift tax would result in a $500,000 annual reduction in probate fee revenue, he said.

Patricelli said the proposed legislation does not call for a net increase in taxes, compared with Lamont’s budget that seeks to raise more than $500 million in net new taxes, “without material pro-growth provisions,” he said.

The competing budget plans would broaden the sales tax base, but Patricelli’s version is “much narrower, focused on economic growth and retention/attraction of high net worth people,” he said.

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The legislation also recommends a scholarship program for science, technology, engineering and math paid for by bonding and financing 4,000 four-year scholarships at up to $5,000 a year each. The price tag would be $20 million in the first year and rise to $80 million a year when fully working, he said.

Jennifer Widness, president of the Connecticut Conference of Independent Colleges, said the group supports the legislation for proposing a scholarship fund for Connecticut students who enroll in a degree program in science, technology, engineering, math and health professions.

Employers have complained about their inability to fill positions that call for proficiency in science, technology, engineering and math, she said.

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The fiscal stability commission was established in 2017 as part of the budget enacted by then-Gov. Dannel P. Malloy and the legislature. Comprised of executives and business representatives, it produced a 68-page report last year recommending scores of policies to end the state’s fiscal stalemate and jumpstart the economy.

Organized labor criticized the panel, saying its outlook was skewed to favor business.

Patricelli reminded lawmakers that between 2007 and 2017, Connecticut’s economy contracted by 9.1 percent in contrast to more than 10 percent growth in all states and 8 percent in New England.