From the Office of State Senator Kevin Witkos
Several weeks ago, I wrote a column about the budget issues facing the State of Connecticut. At the time, it was announced that the budget would be facing a $1.1 billion deficit during the next fiscal year despite the largest tax increase in state history that took place in 2011. Since then, state officials have taken several steps to decrease this year's $365 million deficit before the next two-year budget is developed, including $123 million in an initial round of cuts and an additional $243 million for the legislature to consider during this week's special session.
At the end of my column, I referenced a letter written by Governor Malloy that was sent to my office. He assured members of the legislature that "we [will] address our current shortfall. And rest assured: it will be addressed, and it will be closed -- without raising taxes." However, after last week's meeting of the State Bond Commission, the governor clarified his previous remarks by saying that "we never said that we wouldn't look at revenue." Of course, this is really just another way of saying increasing taxes.
While much remains to be ironed out, the Governor's Office published a document called the "Roadmap to Deficit Mitigation" that identifies additional spending reductions and "revenue" increases. One of these line items is entitled "Revise the Corporation Tax Credit Cap" and is projected to increase state revenues by $12 million. However, as we remember from the 2011 budget, projections and actual results can often end up quite far apart.
The corporation tax credit cap is a limit that determines how many tax credits may be used to offset a corporation's tax liability. Currently, this cap is set at 70%, meaning that a corporation would be liable for 30% of tax liability regardless of how many tax credits they had beyond this limit. Under this new proposal, it appears as though the cap will be lowered to 60%, therefore meaning that state companies will be paying more in taxes.
What are the effects of this change? Beyond the increased burden on businesses, the state seems to be sending contradictory messages to businesses. On one hand, the state will be increasing the tax liability on businesses while on the other hand, the state is also handing out tens of millions of dollars to help companies relocate and create jobs here. As my colleagues have pointed out, Connecticut should be doing more to reduce the tax and regulatory burden on companies so that they will want to relocate here on their own, instead of with multimillion dollar state investments.
For example, shortly before the governor discussed his desire to raise "revenue" through lowering the tax credit cap, he presided over the State Bond Commission that approved $23.5 million in bonding, or borrowing, that will be given to four companies to assist with relocation and expansion costs.
These include a $6.5 million loan to Charter Communications, a $9 million grant to Deloitte Services, a $4 million loan to Nufern, Inc., and a $4 million loan to help Back9Network.
Since my previous column on the state's budget deficit, it has also been determined that the General Assembly will reconvene for a special session on Wednesday, December 19th with the purpose of considering and voting on a deficit mitigation plan to get the state budget back under control. Next week, I will share an in depth perspective of what happened during the session.
Sen. Witkos (www.SenatorWitkos.com) represents the 8th Senate District, including the communities of Avon, Barkhamsted, Canton, Colebrook, Granby, Hartland, Harwinton, New Hartford, Norfolk, Simsbury and Torrington. He can be reached by phone at 1-800-842-1421 or by email at Kevin.Witkos@cga.ct.gov.