Hartford Business Journal

26 HARTFORDBUSINESS.COM | JANUARY 23, 2023 Editor's Take OTHER VOICES Lawmakers shouldn't overlook efforts to lower CT's cost of doing business F or the second straight year, the conversation at the start of the legislative session is focused more on tax cuts than hikes. It's a refreshing shift for a state that for years suffered from fiscal instability that led to several major tax increases last decade. An influx of federal COVID-relief money, a stock market that performed well during most of the pandemic, and fiscal guardrails adopted in 2017 have helped the state record surpluses, replenish its rainy day fund and pay down some long-term pension liabilities. That allowed lawmakers last year to approve $600 million in tax cuts, mostly benefiting individual taxpayers. This year Gov. Ned Lamont has said he would support an income tax cut for middle-class families, likely targeting joint filers earning up to $150,000. Republican lawmakers last year pitched a similar proposal that would have reduced the income tax rate from 5% to 4% for individuals earning less than $75,000 and joint filers earning less than $175,000 annually. Lowering Connecticut's cost of living is smart policy, especially since it's been discussed as a major factor impacting the state's workforce shortage. High housing and other costs are seen as detriments to Connecticut's ability to grow its popu- lation, something that's desperately needed as Baby Boomers increas- ingly reach retirement age. But policymakers should also consider ways to reduce the cost of doing business in the state. While residents have been impacted by inflation and escalating housing costs, businesses, especially small employers, have faced similar, even greater challenges, including rising material, wage and healthcare costs. Despite passing a historic tax cut last year, the Connecticut Business & Industry Association called the 2022 legislative session "disappointing" because lawmakers failed to provide much support to businesses. If Connecticut is serious about improving its ranking in CNBC's annual "Top States For Business" report, it will have to lower business costs. Connecticut ranked 45th nationally in the cost of doing busi- ness category and fell to 39th overall in last year's ranking. What can the legislature do? I asked CBIA CEO Chris DiPen- tima what his organization will be looking for during this year's legislative session. He said CBIA will lobby for extending the R&D tax credit to pass-through entities, fully restoring the pass-through entity tax credit, additional funding for the unemploy- ment trust fund so businesses avoid a loan surcharge and eliminating the sales tax on training programs. CBIA will also push for increasing the commercial battery storage incentive program to help lower energy costs. To his credit, Lamont seems receptive. On Jan. 18, he announced his first legislative proposal of 2023 would be to restore Connecticut's pass-through entity tax credit to its original level of 93.01%, which would enable small business owners to claim a larger credit on their personal returns. He also told the Hartford Business Journal in December he would consider allowing the expiring corporate business tax surcharge to sunset. Of course, as lawmakers consider tax cuts they still need to focus on maintaining fiscal stability. While Connecticut is enjoying a run of surpluses, we know they won't last forever. Passing tax cuts only to eliminate them years later only creates uncertainty for businesses and residents. Lawmakers should only consider tax relief that is sustainable and provides the biggest economic return for the state. Given the longer-term budget uncertainty, lawmakers should also consider proposals that would lower business costs without reducing tax revenue. DiPentima said he has a few suggestions, including reducing the number of years for transferring out-of-state occupational licenses, which would make it easier for multi- state businesses to add employees in Connecticut. He also said lawmakers should avoid any new employer mandates that add administrative burdens and costs on small companies. With any legislative session, the General Assembly has an opportunity to improve Connecticut's long-term economic prospects. Let's see if they can take advantage during a time of fiscal stability. Federal omnibus delivers for New England By James T. Brett I n the final days of the 117th Congress, lawmakers passed a $1.7-trillion omnibus appropri- ations bill for fiscal year 2023, and President Joe Biden signed it into law in December. Included in this sweeping legis- lation are landmark investments in education, health care, protecting our envi- ronment, supporting working families, and investing in research and innovation. The New England Council — the nation's oldest regional business associa- tion — was pleased to see many of our longtime priorities included, and we believe this legislation will help drive our region's continued economic growth. Here are a few of the biggest wins for New England in the bill: Increased Pell Grant — The Pell Grant is a key tool to expanding access to higher education, providing support for low-income students to attend college. The council has long supported increasing the maximum Pell Grant amount — in fact, we have advocated for doubling the maximum grant. While the omnibus did not go so far as to double Pell, it did increase the maximum award by $500 to $7,395 for the 2023-2024 school year, marking the largest increase since the 2009-2010 school year. This boost is a step in the right direction toward making college more affordable for millions of students and preparing the workforce of the future. Federal research funding — New England is home to some of the top research institutions, including world- class universities and hospitals. These facilities conduct research on some of the most pressing medical and scien- tific challenges facing our nation. As such, the council has long supported federal investments in research, and so we were pleased that the omnibus included $47.5 billion for the National Institutes of Health (NIH) — a 5.6% increase — as well as a historic 12% increase for the National Science Foundation (NSF) to $9.9 billion. These investments will undoubt- edly spur medical and scientific breakthroughs in our region, while supporting thousands of jobs at our research facilities. Mental health and substance abuse — The need for increased mental health and substance abuse services is one of the biggest health challenges facing our region, and the nation at large. The demand for services has only surged in recent years as the pandemic has presented new chal- lenges for those who struggle with mental health and addiction. Fortunately, the spending bill included billions of dollars for new and increased services, including $1.01 billion for mental health block grants, $385 million for certified community behavioral health clinics, and $1.6 billion to states to address the opioid misuse epidemic through the state opioid response grant. These funds will help expand much-needed services in our commu- nities and set millions of people on the path toward recovery. Energy efficiency and renewable energy — The New England region is a leader in efforts to decrease carbon emissions and develop renewable energy resources. The spending bill included a number of measures that will support this effort and help create new jobs in the clean energy sector. The $3.46 billion appropriated in the bill for energy efficiency and renewable energy — a $260-million increase over the previous fiscal year — will allow for investments in vehicle technologies, hydrogen research and development, weatherization assis- tance programs, and renewable grid integration, as well as marine, wind and solar energy. Retirement savings — Finally, the spending bill also includes a number of provisions aimed at bolstering retirement savings and ensuring a secure financial future for millions of American workers. The bill included a legislative package championed by the dean of the New England House delegation, U.S. Rep. Richard Neal of Massachu- setts, known as SECURE 2.0. Specifically, the bill will expand access to retirement savings plan enrollment, allow emergency with- drawal from plans, increase the opportunity to make catch-up contribu- tions, and support workers paying off student loan debt, just to name a few. Inclusion of these provisions will undoubtedly help U.S. workers better prepare for their futures. Beyond these provisions, the spending bill also includes invest- ments to bolster working families, expand access to affordable housing, and support our law enforcement, military and veterans. James T. Brett is the president and CEO of The New England Council, a regional alliance of businesses, nonprofit organizations, and health and educational institutions. James Brett Greg Bordonaro

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