[Editor’s note: This story was updated at 1:25 p.m. Monday to include information and comments from a legislative committee meeting]
If the legislature approves a budget deal reached over the weekend, businesses can expect a range of impacts.
The following is a list of what proposals are known to be in the agreement that is pending approval as early as today (the legislative session officially ends Wednesday):
- Sales tax to remain at 6.35 percent: There had been earlier talk of lowering the sales tax rate in exchange for levying sales taxes on various business services, such as accountants and architects. The expanded sales tax, however, didn’t make it into the agreement. The budget deal, however, does call for 0.5 percent of the sales tax to be dedicated to Gov. Dannel P. Malloy’s transportation agenda, the governor’s office said Sunday. That will mean $2.8 billion in additional transportation infrastructure spending over the next five years, he said. Republicans argued Monday afternoon that proposed transfers from the special transportation fund will almost entirely negate the impact of the added revenue in the first two years.
- Income taxes rising on wealthy: Individuals earning $500,000 or more and couples earning $1 million or more would see their income taxes rise from 6.7 percent to 6.99 percent, Senate Minority Leader Len Fasano, R-North Haven, said. Meanwhile, an additional 2 percent tax on capital gains earning of wealthy residents was dropped from the deal.
- Property tax credit lowered: A tax $300 tax credit property owners can claim would be lowered to $200.
- Data-processing services taxes: While accountants, veterinarians, and other may be spared collecting sales tax, the agreement includes a tax increase on computer and data services and world wide web services, from 1 percent to 3 percent. That would affect iTunes and other media downloads.
- Keno legalized: Under the agreement, the Connecticut Lottery Corp. would receive the go-ahead to launch Keno. CLC previously estimated that the game could bring approximately $28 million in revenue to state coffers in its first year.
- Corporate-tax “loopholes” closed: House Speaker Brendan Sharkey, D-Hamden, wrote in an op-ed in the Hartford Courant that the deal will close “corporate tax loopholes allowing Connecticut corporations to hide their profits out of state or offshore.” He did not elaborate. House legislators on Monday said a “unitary tax” on companies that have operations in multiple states would raise nearly $39 million in fiscal year 2016.
Just after noon Monday, during a Finance, Revenue, and Bonding Committee meeting, Republicans blasted the agreement, which they said took place behind closed doors and without their input. They believe the proposal would amount to the second largest tax increase in Connecticut history.
Rep. John Frey, R-Ridgefield, said he is worried that the unitary tax could mean the loss of corporate headquarters in Connecticut.
Frey said General Electric CFO Jeffrey Bornstein contacted him recently.
“The bottom line was whether GE reconsiders whether they consider calling Connecticut home,” Frey said. “I don’t think this is an idle threat.”
The Connecticut Business & Industry Association issued a call just before noon Monday for the legislature to reject the agreement, arguing it would make it more difficult to create and retain jobs in the state.
“Big increases in state spending combined with major tax increases on employers will undermine family income by making the state much less attractive for job growth,” CBIA President Joe Brennan said in a statement. “The major changes to our corporate tax, combined with the tripling of the sales tax on computer services, will mean less investment and fewer jobs going forward.”
