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Lamont Offers Tax Relief In Jobs Plan; CCM Wants To Work With State

Lamont Offers Tax Relief In Jobs Plan; CCM Wants To Work With State
        

CT Mirror, September 24, 2018

By Keith Phaneuf

Democrat Ned Lamont has come down hard on his GOP rival for proposing unprecedented tax relief with no plan to pay for it.

But Wednesday, Lamont made a similar move when he unveiled a jobs plan centered on three business tax cuts — and a previously disclosed middle-class income tax break — none of which he could provide without solving a much-larger state budget deficit.

And so far, neither Lamont nor Republican nominee Bob Stefanowski have disclosed how they would solve that $2 billion problem.

“Whether entrepreneurs have the next big idea or a family wants to open a new neighborhood restaurant, our state government too often litters the path to success with needless fees, an endless maze of paperwork, and burdensome regulations that don’t protect public health and safety,” Lamont, a Greenwich businessman, wrote in his plan. “ … I will create an environment where startups and small businesses can thrive.”

Lamont already has proposed expanding — over three years — the $200 state income tax credit that offsets a portion of middle-income households’ local property tax burdens.

The base credit would grow from $200 to $300 while a “targeted relief” program for 315,000 of the poorest households would provide an average benefit of nearly $700.

To grow jobs, Lamont proposed Wednesday building on this tax break with three more:

  • Eliminating the $250 business entity tax imposed every two years on many limited liability partnerships and corporations, as well as other small businesses that aren’t subject to the state’s corporation tax.
  • Exempting businesses with less than $10,000 in taxable personal property from municipal property taxation. 
  • Reducing the state’s capital stock tax, also known as the capital base component of the corporation tax, which is a levy on a business’s net worth or capital holdings.  Connecticut imposes the nation’s highest rate at 0.31 percent. Lamont doesn’t say how much he would lower the rate, or how he would pay for this tax cut.

Connecticut is one of 16 states with a capital stock tax and one of just three — along with Massachusetts and New York — that does so as part of a larger corporation tax. Companies pay a corporation tax based on either the capital stock calculation, or a more traditional formula based on the company’s net income, whichever is higher.

A state tax study panel recommended eliminating the capital stock tax in 2015, but also suggested raising the traditional corporation tax rate to ensure the state loses no revenue overall.

“Our working environment has been unpredictable,” Lamont said. “We need to create a stable business climate that allows us to support companies here at home and train our workforce for the jobs of tomorrow.”

 

‘An honestly balanced budget’ back to top

 

But Lamont also has repeatedly pledged to deliver an “honestly balanced budget” — something that will be increasingly difficult to achieve in Connecticut over the next decade-and-a-half.

Surging retirement benefit and other debt costs, as well as an economic recovery that has lagged behind the nation’s, have left state analysts seeing red.

State finances, unless adjusted, are on pace to run $2 billion in deficit in the first fiscal year after the election. And the potential gap grows by more than $500 million in each of the three fiscal years after that.

Lamont’s income tax relief plan involving the property tax credit would cost $400 million per year, and he says he will cover that cost with savings in the prison system, better tax collection enforcement, and imposing fees on sports betting.

His new plan doesn’t say how he would replace the $40 million produced biennially by the business entity tax — or about $20 million per year.

In addition, cities and towns would lose $6 million annually through Lamont’s plan to exempt a portion of business property from local taxation. The Lamont campaign says it would make communities whole, but offers no details.

Joe Delong, executive director of the Connecticut Conference of Municipalities, said communities aren’t opposed to working with the state to bolster the economy.

“But it’s got to be a holistic solution,” DeLong said. “There is no line in the sand. But you have to do this as part of a broader package that promotes municipal growth, not just transfer costs from one place to another. We’re there to work with either candidate if they take a holistic approach.”

Can Lamont sustain more than $420 million in annual state tax relief without closing a $2 billion hole in state finances, or addressing more red ink on the fiscal horizon?

Neither he nor Stefanowski have delivered a blueprint to solve that $2 billion problem.