Q&A talks about small business with Andrew Markowski, Connecticut director of the National Federation of Independent Businesses.
Q: There’s been a lot of buzz about this not being a good legislative session for small business. What’s your perception? What are some of the major issues facing small business in the legislature?
A: If the old saying “perception is reality” holds true, than this has been a terrible session for small business. Since most small businesses are organized as “pass through” entities (i.e. S corps, etc.) the increase in income taxes is going to affect them dramatically. Those retail businesses along our borders are going to lose sales of clothing under $50, boat repairs, cigarettes, gasoline and alcohol (a 20 percent increase). And it’s anybody’s guess how much damage the luxury tax is going to do to the boat and auto dealers, let alone the many small business owners, such as landscapers, building contractors and others who drive light trucks and service vans for their businesses. The major issue facing all small businesses is that the overall business climate in Connecticut is absolutely horrible, ranked 47th according to some, soon to be 48th or 49th after governor’s Chris Christie and Andrew Cuomo are through reorganizing their respective governments and perception is even worse. And the legislature is certainly not doing anything to combat that perception by striving to make Connecticut the first state in the nation to mandate employers provide paid leave.
Q: Is the General Assembly considering anything that is going to help small business? Any pro-business legislation?
A: Most small business owners would tell you that they don’t need the state to enact any new laws or regulations. They don’t want the state spending more money on programs which purport to create jobs, but are usually proven to be ineffective or have a limited return on investment. They will tell you that government doesn’t create jobs, entrepreneurs do. And they will tell you that if anything, rather than proposing new measures, the state of Connecticut should start repealing some of the many laws and regulations already on the books. Some specific initiatives to continue to streamline the regulatory and permitting processes are a step in the right direction, as is the proposal to create a single point of entry online “business portal” on the Secretary of State’s website, but the bottom line is that these positives pale in comparison to the negatives. Unfortunately, individual legislative proposals will probably not be enough to cure the state’s economic woes. It will take a major reform of state spending, tax and regulatory policy. Except for the legislature’s Commerce Committee, which has demonstrated leadership through many pro-jobs bills, it does not appear that job creation is a top priority for the legislature.
Q: What’s driving the captive audience legislation? Why do people think it’s bad for employers to discuss issues from their perspective with employees?
A: It has to do with the desire of organized labor to control and/or limit the information that employees receive on issues in which it has a political interest. It’s an Orwellian project that seeks to prevent employees from having multiple sources of information on which to develop opinions on important public policies and workplace matters.
Q: Is there demonstrable proof of small businesses wanting to move to neighboring states?
A: The recent U.S. Census report shows very starkly that the states with the fastest growing populations have the most favorable tax climates. IRS data show the same trend. In fact, according to the IRS, between 1998 and 2008, Connecticut had a net loss of 62,000 tax returns. That means that 62,000 more income tax fliers move out of Connecticut than moved into Connecticut. More than 30,000 of them moved to Florida, where there is no personal income tax. In fact, Connecticut had a net loss of income tax fliers to 35 of the 50 states. I’ve recently had several NFIB members and other small business owners tell me that they are in the process of closing their business operations in Connecticut and moving elsewhere.
It is highly unlikely, however, that most of the people departing are going to take the time to write a “Dear John” letter to the state (although I wish they would). They will simply and quietly leave, as they have been for years. Look at how we treat business in this state; how could they not be leaving? So, this isn’t a theory. And it is not just small businesses.
Recently, several high-profile companies have announced they are moving to and/or expanding in Massachusetts, Rhode Island, and New York, and that is just a few examples. Taxpayers seek lower taxes. As I’ve said previously, Malloy’s tax hikes are going to accelerate a trend that has been in motion for at least a decade. Bet on it. And consider that earlier this week, New York announced a big pension reform that will save tens of millions, and New Jersey announced a substantial revenue gain that the governor wants to use for property tax relief. The neighborhood is changing and our house is looking shabbier.
Q: On your website you criticize some big business leaders for favoring the tax increases. Does big business not have an accurate understanding of the pressures facing small businesses?
A: General Electric made $5 billion in profits last year and paid no federal taxes. Zero. Experts estimate that corporations are holding trillions of dollars in overseas accounts in order to escape taxes. They’ve got law firms, accountants and lobbyists working full time to write loopholes into the tax code so that they can mitigate their obligations. Additionally, big corporations often have commercial, financial and regulatory relationships with state government that small businesses can’t match. So, the answer is yes, big corporations have a decidedly different view of taxes than small business owners, who typically pay as individual filers and who don’t have the resources or the political juice to avoid paying them.
Q: Let’s say tomorrow you woke up and were governor. What’s the first thing you’re going to do to help your group’s membership?
A: Repeal the recent Malloy tax hikes, make further cuts to state government spending, propose additional pension reform, and call for a moratorium on the adoption of any new regulations or legislative mandates on employers, like the proposed “mandated paid sick leave” legislation, until a top-to-bottom review of regulations can be completed. How can we keep piling on new regulations and mandates for employers and yet claim Connecticut is open for business? NFIB members and all small businesses need certainty. Certainty that their taxes, electric costs, gas prices, unemployment compensation payments and health insurance costs won’t continue to rise. Certainty that depressed sales will turn around. Certainty that Connecticut’s public policies are going to move us in the right direction for immediate and sustained job growth. Then of course I would cut taxes for Red Sox fans, raise them for Yankees fans and bail out the Mets fans.
