Hartford Business Journal

10 HARTFORDBUSINESS.COM | May 23, 2022 Despite historic tax cut, state's largest business lobby still 'disappointed' with legislative session By Greg Bordonaro gbordonaro@hartfordbusiness.com n a year when state lawmakers and the governor agree on hundreds of millions of dollars in tax cuts, one might assume the state's largest business lobby would be fully supportive of the legislative session's outcome. That wasn't the case in 2022. In fact, Connecticut Business & Industry Association CEO Chris DiPentima hasn't been shy about calling the recently-completed legislative session "a disappointment for employers." His main gripes include a lack of tax cuts for businesses at a time when the state has a budget surplus approaching $4 billion. The $24.2 billion budget approved by lawmakers and signed into law by Gov. Ned Lamont earlier this month includes $600 million in individual tax relief, which DiPentima called "a small step in the right direction for addressing the state's high cost of living." But he said he was disappointed that only $40 million was allocated toward the state's federal unemployment insurance fund debt — just 8% of the $495 million balance. The state was forced to borrow about $953 million from the federal government to continue paying out jobless benefits during the pandemic- induced economic downturn that started in March 2020. Nearly half of that money has been repaid, but the remaining balance is "essentially a $400 million-plus tax hike on employers," which will be paid back over the next four years, DiPentima said. CBIA was also vocal in opposition to the captive audience bill, which passed both legislative chambers and bans mandatory company meetings that discuss employee labor issues. Critics have said such meetings are used to shut down employee organizing efforts, but the CBIA called the bill "widely regarded as an unconstitutional attempt to restrict workplace communications and an infringement on employer free speech rights." The CBIA recently joined leaders from more than 50 businesses and trade groups asking Lamont to veto the bill. That didn't happen — the governor signed the bill into law May 17. CBIA and others may challenge it in court, DiPentima warned. The captive audience legislation was one of 25 employer mandates CBIA opposed this year. The rest didn't make it through the legislature, which DiPentima said was a victory. There were other wins, he said. There were significant investments in workforce development that could help address the state's labor shortage, which he said is Connecticut's main economic challenge. CBIA also applauded the $3.5 billion supplemental payment lawmakers agreed to make against the state's massive pension debt, which will lead to long-term cost savings. DiPentima chatted with HBJ about his thoughts on the recently- concluded legislative session. Here's what else he had to say: Q. Why was CBIA so frustrated with how the 2022 legislative session played out? A. I think we played way too much defense, otherwise it would have been somewhat of a disastrous session. That's disappointing. There were some highlights and lowlights, so it was a bit of a mixed bag. But the fact we had to play that much defense at a time when we've got a historic budget surplus and an opportunity to really spur Connecticut's economy, it's disappointing there couldn't be more collaboration on a strong economic investment. Q. What were the biggest missed opportunities? A. Making the state more affordable for businesses. I thought we did an OK job for making it more affordable for residents, which is one of our priorities so we can maintain or grow the population. We won't grow the population unless Connecticut is affordable and people want to come to the state. The $600 million in tax relief was good, but about half of it goes away after a year. The biggest disappointment is there was very little tax relief on the business side. Q. On the unemployment insurance trust fund, were you looking for lawmakers to wipe out the entire $495 million debt? A. We were never lobbying for the full amount. In our minds, we were looking for a payment somewhere between $100 million and $155 On The Record | Q&A million. That would have really helped with the current fiscal year and next fiscal year. I don't think people would have noticed a big difference between a $3.5 billion payment to the pension liability vs. a $3.4 billion or $3.45 billion payment. I think some of the pension fund payment should have been diverted to pay down more of the unemployment trust fund debt. Q. Was the unemployment insurance fund payment the primary item CBIA was lobbying for in terms of business tax cuts? A. In addition to that we were also lobbying for the research and development tax credit going to pass- through entities. That didn't happen, but it would have sent a good strong message and created quite a bit of economic return on investment, especially from the manufacturing and biopharma industries. The legislature did agree to do a study on the implications of an R&D tax credit for pass-through entities. We also lobbied for restoring the pass-through entity tax credit back to the 92% threshold, but it didn't get through. The budget did expand the manufacturing apprenticeship tax credit to small businesses and repealed taxes on ambulatory surgical centers and movie theaters, which were good things. Q. Do you think the $600 million in tax cuts will have a meaningful economic impact? A. It's a good question. It would have been nice if it was more structural. Individuals like businesses want some type of predictability and stability and the fact that half of the tax cut is here today and gone tomorrow, that's not going to give people a warm and fuzzy feeling. I think it will provide some economic return. The property tax is a major issue in Connecticut. We are one of the few states that has it and we have a significant reliance on it. The property tax, we've heard it from individuals and businesses, is a bit of a barrier to entry to Connecticut, so I think the move to increase the property tax credit and lower the cap on motor vehicle property taxes will have a positive economic impact. Q. You have said the state's lack of affordability is contributing to the workforce shortage. How can Connecticut better address that issue and make the state more affordable? A. We can make some structural reforms. It's tough to get too aggressive on the income tax because we do rely on it for such a big piece of revenue, but even chipping away at it, knocking it down by a percentage point could have an impact. Connecticut Business & Industry Association CEO Chris DiPentima said lawmakers missed a chance to give the economy a bigger boost coming out of the pandemic. HBJ PHOTO | STEVE LASCHEVER

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