CBIA officials warn against tax increases

By Lee Howard, The Day

Two officials representing an influential Connecticut business group said Wednesday that state legislators had better think twice before passing any tax increases this year.

With the state facing a projected budget deficit of up to $8.6 billion over the next two years, several bills are currently on the table that would hurt businesses at a time when they are most vulnerable, said the two officials with the Connecticut Business & Industry Association. If passed, the bills would also likely result in job losses and even slower economic activity, they said.

"We think our legislators have to look at this as an economic problem, not just a budget problem," said John R. Rathgeber, president and chief executive of CBIA, during a meeting with The Day's editorial board.

Among the taxes being proposed in the current legislative session is a measure that would eliminate nearly all sales-tax exemptions, including those for machinery and equipment, and to extend the sales tax to most professional and business services. Other revenue-generating bills would impose a two-year moratorium on corporate tax credits, including those that encourage research and development; reduce the use or effectiveness of tax credits, as well as change reporting requirements for the corporate business tax.

"It was like they were looking at 'What are the worst things we can do,' " said Joseph F. Brennan, senior vice president of the business association. "They just looked at the numbers; they didn't look at the impact."

Brennan and Rathgeber said the legislature raised taxes during Connecticut's last major recession, in 1989-1992, resulting in the loss of about 160,000 jobs or nearly 10 percent of the state's work force. The tax increases kept the state from shrugging off economic woes as quickly as other parts of the country, they said, and it took nearly a decade to recoup lost jobs.

The tax proposals have led business people from across the state to deluge legislators with letters opposing any increase.

"If enacted, these bills will drive existing jobs out of Connecticut, and they will make it less attractive for current or potential employers to invest, grow and create jobs in our state," said one letter, written by Lawrence F. Clark, chairman of Sonalysts Inc. in Waterford.

Rathgeber backed Gov. M. Jodi Rell's budget plan, which includes no new taxes, saying new levies now being debated in the legislature's Finance Committee would be "really damaging." In addition to hurting the economy and resulting in job losses, tax increases would send a message to businesses that the state doesn't want to cultivate them, he said.

"Many other states are choosing to expand their way out of the recession by encouraging business development," Brennan said in a statement. "The Finance Committee and the legislature must take actions to promote economic recovery, not hinder it."