Hartford Business Journal

HARTFORDBUSINESS.COM | JULY 14, 2025 17 SE RIES | CT'S ECONOMIC COMPE TITIVENES S Dustin Nord, director of the CBIA Foundation for Economic Growth and Opportunity, says that's the difficulty the two studies face. "It's challenging to measure (taxes) across states, because states have different tax systems," Nord said. "So, you're not necessarily comparing apples to apples." Some states, for example, have county governments with taxing authority, while others, such as Connecticut, do not, which places more of the tax burden at the state level. Ultimately, though, experts agree that while it's generally more expen- sive to do business in Connecticut, taxes aren't the primary reason for that — but the state could still find ways to improve. Energy, workforce, commercial real estate and other expenses also factor into the cost-of-doing-business equation. Lately, Connecticut's high- est-in-the-nation electricity prices have generated the loudest concerns from business leaders and policymakers, with O'Keefe calling them an "existen- tial threat" to the state's continuing economic progress. Lawmakers did pass some energy reforms this past session, which will reduce costs immediately by removing public benefits and other charges from ratepayer bills. However, the state will now borrow money to cover those costs. In another closely watched study, CNBC's "America's Top States for Business," Connecticut ranked as the 28th best state in the country in 2025, an improvement from No. 32 in 2024. However, the state ranked worse in the cost-of-doing-business category at No. 44. The index Hartford Business Journal reached out to both Ernst & Young and the Tax Foundation to discuss their business tax studies. Despite repeated attempts, no one from the Washington, D.C.-based Tax Foundation responded. As it explains in its report, the foundation scores states on five "tax code components": • Corporate taxes; • Individual income taxes; • Sales, use and excise taxes; • Property and wealth taxes; and • Unemployment insurance taxes. States without one or more of those, such as those with no sales tax, do better in the index, as do states that have all five but impose them at moderate rates. "Taxes are not everything, but they do matter," the foundation report explains, while adding, "the index measures tax structure, not all the other things businesses care about," such as an educated workforce or quality of life. Connecticut's ranking in the index has been remarkably consistent. In 2018, it ranked 44th. Every year since, it has ranked 47th, or fourth from the bottom. In the latest study published last October, Connecticut ranked No. 50 in the property taxes category. It fared better in the sales and corporate taxes categories, ranking No. 21 and No. 31, respectively. The foundation noted that Connecti- cut's "corporate income tax rate is high at 7.5 percent, though still lower than in other New England states, such as Massachusetts and Delaware." Notably, state lawmakers in the recently completed legislative session approved a two-year, $55.8 billion budget that extends a temporary 10% corporate tax surcharge for three more years. The surcharge — which applies to companies that have at least $100 million in annual gross income and has been in place since 2009 — is expected to generate $128 million in tax revenue over the next two fiscal years. The Tax Foundation also said the state's sales tax rate of 6.35% is competitive both nationally and regionally. While the Tax Foundation describes itself as "the world's leading nonpartisan tax policy nonprofit," O'Keefe disagrees, claiming it has "a political ideology." "The Tax Foundation is funded by the Koch brothers," he said, referring to the wealthy conservative libertarian family. "They have a view that taxes are bad, that taxes should be zero, taxes should be flat, they should be simple, and we get penalized for a progressive income tax." As proof of the index's bias, O'Keefe — an enthusiastic supporter of the Democratic Party who has volunteered as a fundraiser for national campaigns since the late 1990s — noted that in 2023 Connecticut approved $600 million in tax cuts, the largest cut in the state's history, "and our ranking didn't move an inch." Those tax cuts included income tax relief, a car tax freeze and an extended gasoline tax holiday. Where can CT improve? So, whether you believe the Tax Foundation index or the Ernst & Young study, experts agree that Connecticut could do better. Roberti, who suggested placing the studies in the context of the state's fiscal condition, said he believes Connecticut "actually is in pretty good shape." But he still has suggestions. He notes that Connecticut's base corporate tax rate and the 10% Nord hired to lead CBIA Foundation's efforts to boost state's competitiveness By David Krechevsky davidk@hartfordbusiness.com T he CBIA Foundation for Economic Growth & Opportunity was formed in 2023, but it wasn't until midway through 2024 that the organiza- tion hired its first director: Dustin Nord. The 501(c)(3) foundation was created by the state's largest business association to address "the evolving needs of Connecticut's economy," CBIA said. "Our primary goal is charting a course for sustained economic growth that drives further predictability and greater opportunity for all Connecticut residents," the foundation states on its website. Nord was hired in August 2024 after serving nearly three years as a business associate, and then senior research associate with AdvanceCT, a nonprofit that focuses on recruiting new businesses to Connecticut. While working for AdvanceCT, Nord conducted research on the state's economy, while also focusing on policy research related to taxation, housing and occupational licensing. He's performing similar work for the CBIA Foundation. Last September, the foundation released "Opportunity Connecticut," which it described as a "long-term roadmap" to boost the state's economic competitiveness. The foundation worked with Economic Leadership LLC, a North Carolina-based consultant, to formulate the 45-page report, which they described as a stra- tegic economic action plan that also offers recom- mendations for retaining and attracting investment and talent, fostering innovation and expanding career pathway opportunities. That report, in part, also highlighted the Tax Foun- dation's ranking of Connecticut's tax climate as 47th in the U.S., or fourth worst. Its recommendations included eliminating out-of- date and redundant regulations; reducing the complexity of the tax code and the overall tax burden on businesses and residents; reducing the number of occupations that require licenses; and creating more quality and affordable small business health insurance options. While the CBIA foundation plans to update the "Opportunity Connecticut" report every other year, it's scheduled to release a new study in September. "Connecticut By the Numbers" is intended to be a comprehensive analysis of the state's economic position across more than 50 key metrics and bench- marking Connecticut's performance on a range of economic factors. The research and analysis aims to be a tool for the private and public sectors, academia, nonprofits and policymakers, said Chris DiPentima, CBIA president and CEO. "The CBIA Foundation was created to address Connecticut's unique challenges and embrace its many opportunities in a rapidly changing economic landscape," DiPentima said. "Dustin's experience in economic research and business reten- tion and recruitment with AdvanceCT, and his work with nonprofits like the YMCA of Greater Hartford (where he previously served as director of community engagement), give him unique insight and under- standing of the levers of Connecticut's economy." Chris DiPentima Continued on next page Where does business tax revenue come from in CT? SOURCE TAX REVENUE PROPERTY TAX $3.6B SALES TAX $2.2B EXCISE TAX (including public utilities and insurance) $1.6B BUSINESS INCOME AND GROSS RECEIPTS TAX $3.6B UNEMPLOYMENT INSURANCE TAX $0.7B LICENSE AND OTHER TAXES $0.3B TOTAL BUSINESS TAXES $11.9B Source: Ernst & Young total state and local business taxes report (2024)

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