The state legislature’s top leaders claimed they’re “open” to the governor’s plea to roll back some business-tax increases — but made clear they’re not swayed by the threats from General Electric that led to the plea.
State Senate President Martin Looney and House Speaker Brendan Sharkey made the remarks at a press conference called by Mayor Toni Harp Monday to thank them for increased aid to the city found in their newly passed $40.3 billion two-year budget.
Looney and Sharkey have taken heat for that budget from corporate leaders, most of all from GE, which proclaimed it will “seriously consider whether it makes any sense to continue’’ doing business in Connecticut because of it.
As a result of GE’s pressure, Gov. Dannel P. Malloy is asking the legislature to undo $220 million worth of mostly business tax hikes during an upcoming special session. (Click here to read a story about that.) GE’s campaign against the budget has made national headlines, with the help of Fairfield County-dwelling “Morning Joe” co-host Joe Scarborough. Corporate leaders argue that the budget will drive away businesses because it institutes “unitary reporting” — meaning that Connecticut companies must report information on all activities, not just those taking place in state, so Connecticut can better assess how much they owe in taxes. (By eliminating a loophole some companies have exploited to avoid taxes, the change is expected to bring the state an extra $62 million over the next two years.) Malloy proposes delaying the shift to a unitary tax as well as canceling a rise from 1 to 3 percent in the sales tax on services like data-processing; and minimizing the planned drop in a cap on corporate tax credits.
“We’ll keep an open mind” on this proposal, Looney said.
Meanwhile, he and Sharkey tore the proposal apart.
He defended the unitary tax, noting that it is already “standard state taxing policy in every [other] state in the region.” He spoke of how the current sales tax structure “is stuck in the 1950s,” based on a time when 62 percent of the economy was based on sales of products and goods and 38 percent on services — percentages which have now reversed, he said. And he said that contrary to the post-budget-session complaints by corporate leaders, the state ranks as “relatively friendly to business” in most surveys. (Click here for a CT Mirror story about “the tricky business of measuring business climate.”)
Looney and Sharkey argued that the biggest obstacle for business is the state’s reliance on high property taxes — which the budget addressed by capping car taxes and increasing PILOT (Payment In Lieu of Taxes) grants to many cities through a dedicated portion of the sales tax.
Despite what we’ve been reading the past few days, corporate leaders objecting to state taxes really have a different agenda, Looney said — a fight to enact “right-to-work” laws that bust unions. He cited this Sunday New York Times Magazine story as evidence.
“A leader of a business organization in the state told me confidentially at one point,” Looney remarked, “that what is really the single largest weighting factor in all the surveys is whether or not the state is a right to work state or not. If you are not a right to work state, and seen as being friendly to unions, it doesn’t matter what your tax structure is. Looking to bust unions is of greater consequence … That is the underlying thing.”
As for GE? Sharkey and Looney suggested that GE is making them scapegoats for a decision it already made to spin off GE Capital, which accounts for three-quarters of its 5,700-plus member state workforce — a charge the company has termed “completely untrue.” The company already faced unitary reporting requirements in at least 19 states, as of a 2010 study by the group CT Voices for Children.
“I think that a lot of the decisions that are being made within the corporate headquarters of GE in Fairfield have nothing to do with Connecticut’s tax structure,” Sharkey remarked, claiming that GE usually pays little or no corporate taxes already to the state, that it pays more in property taxes to the town of Fairfield. “There seems perhaps to be a disconnect between what is happening internally with GE — its decision to spin off GE Capital — than it has to do with a budget or tax policy. I realize that it made a lot of headlines. I“m not sure if it squares with reality.”
(For a blunter account of the tax protests of state corporate leaders — 58 percent of whose companies paid no state income taxes at last count — read this column by the Courant’s Colin McEnroe. You may need to Google the title, “CT Businesses Howling About Taxes They Don’t Pay,” to bypass the site’s pay wall.)
Meanwhile, Mayor Harp, a former state senator, praised her erstwhile colleagues at the press conference for increasing aid to cities and capping local car taxes at 32 mills. (New Haveners pay 41.55 mills.) The city will receive $15 million more a year from the PILOT program because of the budget, which institutes a three-tier system under which cities with the most tax-exempt property — including New Haven, where about half the property is off the rolls — receive 42 percent reimbursement (up from 32 percent) on hospital and university properties, 32 percent (from 24 percent) on state-owned property.
City Budget Director Joe Clerkin said the change will not affect the city budget that begins July 1, because it doesn’t take effect until next year.
Same with the car-tax change, which is projected to save New Haveners a combined $3.5 million a year. A New Haven owner of a Honda Accord valued at $18,000 will pay $522.19 in taxes this year, $403.20 next year, and $369.94 the year after, when the cap is fully phased in.
New Haven State Rep. Robyn Porter noted that two top New Haven priorities for this year remain to be settled, in the special session: Approval of the governor’s “Second Chance Society” criminal-justice reform, and a proposal to increase accountability of police and protect the rights of citizens who record their public actions.
I believe the case made here in response to GE's claim of over reach of taxes, is valid, however, If Looney's statement that:
"The current sales tax structure "is stuck in the 1950s," based on a time when 62 percent of the economy was based on sales of products and goods and 38 percent on services—percentages which have now reversed",
Then that is the structure that GE and others have come to believe is operative.
The question is why has the legislature, which includes Looney, Sharkey, Toni Walker, and Harp not acted between 2005 to present?
If 58 percent of those companies paid no state income taxes for the 10 year period then obviously, Looney and the other talking heads have been negligent in their representation to their constituents.
As far as Governor Malloy's budget actions are concerned during the past year & one-half budget processes, he has cemented his last term in state office.
Maybe is he now concentrating on Hillary to making him Secretary of State?