A bill would require the state to study — and potentially tax — certain productivity gains tied to the use of AI and other workplace technologies.
A proposal before state lawmakers would require Connecticut to study — and potentially tax — certain productivity gains tied to the use of artificial intelligence and other workplace technologies.
Raised Bill 515 directs the Office of Policy and Management, in consultation with other state agencies, to develop a plan addressing what it describes as a “productivity gap” — situations in which companies increase or maintain revenue while reducing payroll.
The plan, due Jan. 1, 2027, would include a formula for a new surcharge on employers whose revenue per worker rises as payroll declines, effectively allowing the state to recapture a portion of those gains.
The bill also calls for a permanent tax exemption for “augmented productivity,” defined as increased output achieved through technology while maintaining a stable workforce.
The proposal reflects growing policy interest in how advances in artificial intelligence and automation are reshaping labor markets and business operations.
How the surcharge would work
Under the bill, a “productivity gap” would be measured when an employer’s revenue per employee hour increases while its Connecticut workforce or payroll declines.
The surcharge would be structured to reflect the difference between baseline productivity levels and reduced payroll costs. Revenue from the surcharge would be deposited into a new workforce and economic stability account to fund retraining, technical education and career transition programs for displaced workers.
At the same time, companies that use technology to boost productivity without reducing headcount would receive a tax exemption on those gains.
If lawmakers do not adopt the implementation plan by July 1, 2027, the bill authorizes OPM to move forward by issuing policies and procedures to carry it out.
The Finance, Revenue and Bonding Committee is scheduled to hold a public hearing on the bill Friday.
Administration perspective
In written testimony on the bill, Department of Economic and Community Development Commissioner Daniel O’Keefe said the measure would require the state to examine how to respond as technological advances increase output while reducing labor demand.
The required plan would focus on reinvesting capital when business output and labor costs diverge, encouraging technology that augments — rather than replaces — workers, and establishing the surcharge framework, he said.
O’Keefe described the issue as part of a broader shift driven by artificial intelligence and other productivity-enhancing technologies, but noted that funding to develop the plan was not included in the governor’s budget.
Separately, Office of Policy and Management Acting Secretary Joshua Wojcik said the bill aims to modernize the state’s tax system to reflect changes in the economy, including the growing use of collaborative technologies.
However, Wojcik raised concerns about a provision allowing OPM to implement the plan without legislative approval, saying it could conflict with the state constitution by delegating taxing authority to the executive branch.
Business opposition
The Connecticut Business & Industry Association voiced opposition to the measure, arguing it could discourage investment and innovation.
In written testimony, CBIA Vice President of Public Policy Christopher Davis said the bill would effectively penalize companies for improving efficiency through technology.
He said linking a surcharge to changes in revenue, payroll and workforce metrics could create uncertainty for employers making investments in automation or process improvements, and could make the state less competitive.
Davis also raised legal concerns similar to those cited by OPM, arguing that allowing the surcharge framework to take effect without legislative approval could represent an improper delegation of taxing authority.
