Hartford Business Journal

16 HARTFORDBUSINESS.COM | JULY 14, 2025 SERIES | CT'S ECONOMIC COMPETITIVENESS CBIA Foundation Director Dustin Nord says comparing state tax systems is often not 'comparing apples to apples.' HBJ Photo | Steve Laschever Tax Assessment Does CT have high business taxes? There are competing views By David Krechevsky davidk@hartfordbusiness.com A s commissioner of the state Department of Economic and Community Devel- opment, Daniel O'Keefe is one of Connecticut's primary business recruiters. That means he seeks to attract new businesses here, while working to keep those already in Connecticut from moving out. "I spend a lot of time talking to companies in the state, and compa- nies outside of the state — in fact, outside of the country," he said recently after returning from the Paris Air Show, a hallmark annual event for the world's aerospace industry, which has a major presence in Connecticut. "And the cost of doing business is always something that gets discussed." What do business leaders rarely ask him about? Taxes. "The Northeast has a long percep- tion — and I think in many ways, accurately created — that it is a high- er-cost place to do business," O'Keefe said. "But taxes don't often come up." While that may be the case for him, businesses in Connecticut do have concerns about the state's tax climate. For example, a Connecticut Busi- ness & Industry Association survey released last September asked business leaders what main factor hinders business growth here. According to the survey, 33% of respondents cited the lack of skilled job applicants; 21% cited the cost of living; and 12% cited high business taxes — the only items named by more than 10% of respondents. CBIA also often promotes the Tax Foundation's annual "State Tax Competitiveness Index," which has been published since 2003, and for the past seven years has ranked Connecticut's tax burden as the fourth-highest in the nation. The 2025 report, published last October, said property taxes here are the highest in the country, while the income tax burden ranked fourth-highest. Others, though — including O'Keefe and Fred Carstensen, director of the Connecticut Center for Economic Analysis at the University of Connecticut — take an especially dim view of the Tax Foundation index. O'Keefe says he believes the index has political motiva- tions, while Carstensen says it "is not a professional analysis." Instead, they and others prefer the annual state tax climate study produced by accounting firm Ernst & Young. The most recent version, released last December, said Connecticut is among the 12 states with the lowest business tax burdens. It also found that Connecticut, at 32.9%, joins Maryland (29.7%) and Michigan (34.6%) as the states with the lowest business taxes as a share of gross state product. "E&Y works with state financial officials; their analysis is thorough and sophisticated," Carstensen said. "The Tax Foundation does not do that and has none of the sophistication of the E&Y analysis." Given Connecticut's dramatically different rankings in the two studies, businesses thinking about locating here may be confused about the tax climate as compared to other states. Editor's Note: This is the first installment of a four-part series called "CT's Economic Competitiveness." The series will explore Connecticut's economic competitiveness nationally and globally in several key areas, including taxation, regulations and workforce development. The series will run in print issues and online in July and August. See the Editor's Take column on page 29 for more information. Where Does CT Rank CT AMONG THE BEST In Ernst & Young's 2024 study of state and local business taxes, the following 12 U.S. states had the lowest total effective busi- ness tax rate — taxes imposed on businesses as a share of a state's economic activity — in fiscal year 2023: • Indiana, Michigan, North Carolina: 3.4% • Georgia, Missouri: 3.5% • Massachusetts, Utah: 3.6% • Arizona, Wisconsin: 3.9% • Connecticut, Idaho, Maryland: 4% Source: Ernst & Young's "Total state and local business taxes: State-by- state estimates for FY23," published December 2024 CT AMONG THE WORST The five lowest-ranked states in the Tax Foundation's '2025 State Tax Competitiveness Index' include: 50. New York 49. New Jersey 48. California 47. Connecticut 46. Maryland Source: Tax Foundation's "2025 State Tax Competitiveness Index," published October 2024 CT AMONG MIDDLE OF THE PACK CNBC's annual 'America's Top States for Business' index has put Connecticut in the middle tier of states in recent years: CATEGORY 2025 RANK Overall rank 28 Infrastructure 33 Workforce 8 Economy 38 Quality of life 5 Cost of doing business 44 Technology and innovation 19 Business friendliness 35 Education 5 Access to capital 16 Cost of living 37 Daniel O'Keefe Fred Carstensen DUSTIN NORD Director CBIA Foundation for Economic Growth & Opportunity Age: 32 Education: Bachelor's degree in economics, Villanova University

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