Phasing out Connecticut’s corporate income tax “surcharge” and eliminating the minimum corporate income and business entity taxes are several ways to make Connecticut’s tax system more competitive and attractive to business, a new report says.
The nine-member Business Tax Policy Board, which was empanelled earlier this year by Gov. Dannel P. Malloy to review state’s business tax policies, has made a series of recommendations to policy makers that identify specific areas of business taxation and other issues, including tax credits, that should be the focus of future legislation and state economic policy.
The board’s members include Chairwoman Catherine Smith, head of the Department of Economic and Community Development; Department of Revenue Services Commissioner Kevin Sullivan; and Comptroller Kevin Lembo.
The Business Tax Policy board also concentrated heavily on the state’s tax credit programs, suggesting that DECD should administer all programs related to business. The idea is to centralize authority over tax credits and to better align them with the state’s overall economic strategy, officials said.
The board also suggests sun setting or consolidating little used tax credits and limiting the expansion of tax credits against personal income tax to protect against the loss of state tax revenue.
Bonnie Stewart, a lobbyist for the Connecticut Business & Industry Association, said the tax policy panel did a good job of taking into account concerns raised by the business community. She said CBIA members were particularly supportive of getting rid of the corporate income tax surcharge and business entity tax.
“The board stressed the importance of consistency and stability in the tax code, which is important,” Stewart said.
However, the CBIA does have concerns related to transparency issues. Stewart said CBIA would not support any changes that would require disclosure of individual income tax returns or proprietary information about an individual company receiving tax credits or incentives from the state.
Before any recommendations become policy they will be fully vetted for their fiscal and economic impact, and ultimately Malloy and the legislature will make any final decisions, officials said.
And changes won’t happen overnight, but instead likely occur over a six-year period.
Other suggestions made by board include:
• Providing annual budget reporting that tracks total cumulative authorized and claimed credits.
• Requiring annual, combined on-line business/tax registration as a condition of legally engaging in business but eliminate the business termination fee.
• Providing a searchable DECD database for state tax credits and other business assistance programs as well as periodic reporting.
• Phasing down sales taxes on consumer purchases.
• Phasing out taxation of business-to-business computer and data-processing services, analysis, management and management consulting services.
