Small business owners fret as state legislators tinker

BY PAUL HUGHES
REPUBLICAN-AMERICAN
HARTFORD — Patrick Hayden worries his small metal- finishing company in Naugatuck will get overlooked in a larger debate on tax breaks in the state legislature.
Lawmakers are scrutinizing nearly $5 billion in credits, exemptions, deductions and special tax rates that are set out in a variety of state laws.
Hayden, president of Donham Craft Inc., fears that any rollbacks will hit small companies much harder than the corporate giants that some in the legislature might be targeting.
“For the little guy, maybe he is looking for $20,000 or $100,000 in tax credits. It has a definite impact on the bottom line,” Hayden said in an interview Monday. Pat Hayden at Finance Committee Public Hearing
He shared his concerns later with the legislature’s Finance, Revenue and Bonding Committee during a hearing.
The committee’s agenda included bills that proposed a two-year moratorium on business tax credits, elimination of all sales tax exemptions, subjecting more business services to the sales tax and restricting the use of corporation tax credits.
Like Hayden, Peter Kent, CEO and chairman of Bicron Electronics Co. in Canaan, also urged the finance committee to move cautiously. He is worried about business taxes going up.

“The business community is hurting,” Kent said outside the hearing room. “We have seen orders drop in our business quite a bit over the last several months, and we have to look for ways to keep our costs in line.”
He said the state government is also facing declining revenues and it likewise must look to reduce its costs of doing business.
“Legislators tend to think there is a pool of money that we have, that we are making 15 percent to 20 percent profits.
That is not the case,” Hayden said. “I have a wonderful family, a wife, two kids, a dog, a small house in Southbury. I live within my means to make that happen.”
The state government is facing a projected deficit of more than $1 billion through June 30 because of plummeting revenues. The projections for the next two fiscal years are much worse.
The governor’s budget office estimated the 2010 and 2011 shortfalls at $6 billion. The legislature’s Office of Fiscal Analysis projected deficits of nearly $8.7 billion through June 30, 2011.
The Democratic-controlled legislature is now scrutinizing the patchwork of more than 200 tax breaks to determine if any should be eliminated, suspended or revised.
Gov. M Jodi Rell proposed changes to only two tax credits in the two-year, $38.4 billion budget that she recommended to the legislature last week.
Rell would cap the film industry tax credit at $30 million a year. The move would save $25 million a year for the next two years, according to the legislature’s budget office.
Additionally, the governor proposed to suspend a new corporate tax credit for two years. It authorizes tax credits against insurance premiums for rehabilitating historic properties for residential and commercial use. The legislature’s budget office estimates that the suspension of that tax credit will save $20 million over the next two years.
Democrats and even some Republicans on the finance committee said the legislature needs to take a closer look at the assorted credits, deductions, exemptions and special tax rates.
“We have so many on the books and we are looking and questioning each one of them,” said Sen. Eileen Daily, D-Westbrook, the committee’s Senate chairman.
In many cases, Sen. Anthony Guglielmo, R-Stafford Springs, said, there have been no comprehensive reviews since tax breaks were enacted.
Committee members said they want to evaluate which tax breaks are working as intended, which ones are the most and least effective, and which ones are no longer needed.
Guglielmo cited a sales tax exemption for storing boats over the winter. He said Connecticut enacted the exemption because surrounding states didn’t impose such taxes. State marinas complained of losing business to Rhode Island, he said.
To his knowledge, Guglielmo said, no one in state government has reviewed whether Rhode Island, New York and Massachusetts tax boat storage now.
Joan McDonald, the commissioner of the Department of Economic and Community Development, warned the finance committee against taking steps that might make Connecticut less competitive with other states.
Should legislators make every effort to preserve small businesses? Comment on this story at www.rep-am.com.

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