Hartford Business Journal

www.HartfordBusiness.com • January 14, 2019 • Hartford Business Journal 17 governor that will make, for the next two or four years, passing some of these laws a lot easier." (Lamont has said he supports both policies.) Another hot-button issue the Progressive Caucus will push is a tax increase on the wealthy, Elliott said. He thinks the state personal income tax, which is progressive, is the only realistic vehicle through which law- makers can offset the regressive state sales tax and local property taxes. How that plays out in budget talks remains to be seen. Lamont, a tele- com entrepreneur, has pledged not to raise income or sales tax rates, and following a tax hike in 2015, corporate interests that decried a deteriorating business climate have successfully scared lawmakers, including Demo- crats, into closing deficits through other methods. The Democratic governor will face pressure from the Progressive Caucus, which is led by co-chair Rep. Joshua Hall of Hartford and whomever replaces Rep. James Albis, an eight-year House veteran who recently accepted a Lamont admin- istration job, to legislate from the left. (Albis' replacement may or may not be Elliott, who says he's satisfied to "rabble rouse" for the caucus without a formal title.) Other Democratic priorities in Con- necticut this session are expected to include legalizing recreational pot use and sports betting, and authorizing highway tolls, though Lamont has said he only supports limited tolling. Biz groups, GOP survey new landscape Business groups that successfully fought off a minimum wage hike and paid leave over the past two years are casting a wary eye on the newly begun legislative session. "There's definitely some apprehen- sion," said Andrew Markowski, state director for the National Federation of Independent Business (NFIB). Connecticut's minimum wage has fallen behind much of New England, but Markowski noted that the state's economic growth has also lagged, making it the wrong time to pass new employer mandates. Last week, Republicans criticized the two proposed employer mandates, saying they would "curtail economic expansion and stifle job growth." Still, the GOP's House leadership sug- gested there's room for compromise. "It's not like it's something we're un- equivocally against," House Minority Leader Themis Klarides (R-Derby) said of a higher minimum wage. For example, her members may push for exemptions from the higher minimum wage for younger, part- time workers. Connecti- cut Business & Industry Asso- ciation CEO Joe Brennan is well aware of Demo- crats' increased power, but he said he's not ready to concede 2019 anytime soon. Months remain to influ- ence legislators, many of whom he thinks agree that growing Connecticut's economy is one of the best ways to escape the state's fiscal problems. "At the end of the day, when we get to (the end of the legislative session), it may be that certain things pass, but it's not like everything's a fait accompli," Bren- nan said. For example, CBIA could push for a lower increase or longer phase-in of a higher minimum wage, and less generous benefit caps for a paid family medical leave program. Markowski said he is hopeful that Lamont's business background will serve to moderate the legislature's more progressive urges. Opponents have argued a higher minimum wage would force compa- nies to lay off workers, slow invest- ment, raise the prices of goods or services, and raise wages for employ- ees already at or near $15 an hour in order to compensate for the new wage floor. Some studies in recent years have countered opponents' claims, giv- ing ammunition to Democrats and the Connecticut Low Wage Advisory Board, which concluded in 2016 that "the weight of the credible economic research" shows that raising the mini- mum wage will mean higher pay for employees and some benefits for em- ployers, including reduced turnover, higher productivity and increased consumer spending. Markowski said a wage hike would disproportionately impact smaller companies, and Elliott agrees, though he views the issue differently. "The pain is going to be felt by people like me first — people that own small businesses of 50 employees or less, or people in the retail sector or service sector," Elliot said. However, he believes the pain will level off eventually and the wage hike will help the economy. As for paid leave, employers argue it presents an administrative burden and the potential for employees to abuse the benefit. Advocates agree that program design matters, but say paid leave is working well in other states. Big picture Besides finding ways to grow the state's economy, one of employers' major desires this legislative session is for lawmakers to shun last-minute or superficial bud- get patches that all but guarantee future deficits, increasing the chances for unex- pected tax hikes or other changes. Lamont has said forging a gimmickless, bal- anced budget that addresses long- standing struc- tural problems is a top priority. Brennan said if Lamont falls short this year on his budget pledge, it could have a chilling effect on employer per- ceptions. Further complicating matters is the $3 billion-plus budget hole that must be closed over the next two fiscal years. "He's got a delicate thing he's got to do with his first budget. He can't blow up the system, but on the other hand, he can't make it look like business as usual either," Brennan said. And given his dual identities as a busi- nessman and self-described progressive, Lamont could find himself at the center of a game of tug of war between liberal legislators and employers seeking his favor or protection, Elliott said. He's curious to see how Lamont's inclusive style plays out when inter- ests inevitably clash during the budget process. "I don't think he wants to be dis- liked," Elliott said. "But you can't be liked and manage the state. There are people you are going to have to piss off over and over again." It's during those moments, Elliott thinks, that Connecticut will learn more about its new governor. A regressive tax system? When Rep. Josh Elliott (D-Hamden) calls Connecti- cut's tax system regressive, it's not just an opinion. The Democrat is citing a 2014 report by the state's own tax department, that uses a scoring method called the Suits Index to measure the impact of Connecticut's nine major state and local taxes. The Department of Revenue Services concluded the overall impact of those taxes on households in the state is "slightly regressive." That means the percentage of a household's income paid in those taxes decreases as income grows. Though individually some taxes, like the income tax, are progressive, others, like the property tax, are not. Connecticut is far from alone in having a regressive tax system, and it's actually pretty average, accord- ing to the Institute on Taxation and Economic Policy, a left-leaning think tank. ITEP's 2018 ranking of tax equity found that 45 of 50 states have regressive tax systems. ITEP ranks Connecticut as the 29th most regressive. A briefer on CT's min. wage and paid leave Efforts to hike the minimum wage and require paid family medi- cal leave are not exclusive to the state House's Progressive Caucus. Gov. Ned Lamont and many Demo- crats also support the policies. Connecticut last raised its mini- mum wage from $8.70 to $10.10 over a three-year period ending Jan. 2017. While the 2014 law briefly gave the state claim to the highest minimum wage in the country, it has since fallen behind. Minimum wages in nearly every New England state and New York have already surpassed $10.10, with some set to continue to increase in the next few years, ether to set amounts or tied to inflation. If Connecticut implemented paid leave it would join New York, Rhode Island, New Jersey and several other states that have decided to build on a federal mandate that employees in certain circumstances be permitted to take unpaid leave without losing their jobs. CBIA President and CEO Joe Brennan speaks at a recent economic summit, in which he and others discussed challenges and opportunities facing the state. PHOTO | CONTRIBUTED

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