Hartford Business Journal

28 Hartford Business Journal • November 14, 2016 www.HartfordBusiness.com OPINION & COMMENTARY EDITORIAL Time to turn attention to budget, Hartford's fiscal woes W ith election season now over, it's time for state lawmakers to put aside cam- paign rhetoric and start tackling key issues that threaten the future prosper- ity of Greater Hartford and the state as a whole. Last week, state Democrats lost seats to Republicans giving them a slimmer majority in the House (79-72) and ending their full control of the Senate, which now has an equal number of members from both parties. That means Connecticut's Grand Old Party will have to shift its focus from screaming on the sidelines about policy changes to actually helping enact them. We think a more divided government is a good thing for the state, which has failed to rectify its fiscal crisis under one-party rule for the last six years. As we head into Janu- ary's legislative session, here are two major issues lawmakers must make top priorities. Fiscal Stability Connecticut once again faces billion-dollar deficits in the next two fiscal years, leaving legislators with few options when it comes to balancing the budget. Certainly, we can expect calls for tax increases on businesses and wealthy individuals, but they must be rejected. Can Connecticut's most wealthy individuals and businesses afford to pay higher taxes to the state? The answer is probably yes, but another tax increase would do major harm to the state's business climate, which is already ranked among the worst in the nation by many polls. Wealth and businesses, as we've learned, have become increasingly transient, attracted to locations that offer the best overall quality of life. Cost of living and doing business are major factors in that calculation. The constant threat of new and higher taxes in Connecticut is a major deterrent. The state legislature has yet to enact sweeping structural changes to put Connecticut on a more even fiscal footing. Instead, they've tackled deficits by making emergency cuts to make ends meet for the moment, only to realize weeks or months later that an even larger budget gap looms in the future. This can't go on for much longer. We need a blueprint from one or both parties that balances the budget today, tomorrow and years from now. Hartford's Insolvency We know many suburban residents have little sympathy for the city of Hartford's financial crisis, but they should. Yes, Hartford has been poorly managed in the past, but its troubles aren't all of its own doing. As Mayor Luke Bronin has made clear in recent months, the health of Hartford directly impacts the health of the entire region. As Greater Hartford's main employment center, having a strong and vibrant Capital City — that attracts top companies and top talent — only stands to benefit the region as a whole, particularly as more young people are drawn to urban environments. With the city staring down tens of millions of dollars in deficits in the coming years, bankruptcy is a real threat — one that state legislators should help the city avoid. One way to help, is by fully reimbursing Hartford for its tax-exempt properties. As HBJ news editor Matt Pilon reports in this week's issue, more than 50 percent of proper- ty in Hartford is exempt from property taxes because it's owned by tax-exempt entities such as state government, colleges, hospitals or other nonprofits. The state reimburses the city for some of that lost revenue, but not as much as its statutorily required. If the state fully funds its payment in lieu of taxes program, it would give the city another $50 million in annual funding, which would help to close deficits. We think lawmakers should work to make Hartford — and other cities with significant tax-exempt properties — whole, but also attach strings to the extra funding, requiring the city to make structural budget reforms and rein in spending, particularly on union contracts. n OTHER VOICES Congress should repeal the medical device tax By Gary LeBeau C ongress typically levies excise taxes to discourage harmful behaviors such as smoking, alcohol consumption and gambling. While those may make strategic sense, it's puzzling when there is a decision to tax a positive behav - ior — that is, invest- ment in research and development (R&D) to improve patient health. Yet, that's what happened with the enactment of the med- ical device tax in 2012. The 2.3 percent excise tax was origi- nally included as part of the Affordable Care Act (ACA) but revenues from the tax have not met projections. Instead of helping pay for ACA subsidies, it had a number of adverse effects — namely threatening the vitality of an economically sound U.S. industry and sti- fling medical innovation across the spectrum of academic, public and private institutions. Both sides of the aisle recognize the need to correct this course, which is why repeal efforts have growing bipartisan support. F o r t u n a t e l y , patients, providers and manufacturers were able to breathe a sigh of relief in 2015 when legislation to suspend the tax for two years passed with broad bipartisan support. However, with its suspension set to sunset at the end of 2017, the tax is again looming and threatening to slow down just as innovation has been picking up. The medical device tax — a tax on gross sales, not profits — threatened small and large companies and nearly devastated an industry that employs more than 400,000 U.S. workers, generating approximately $25 bil- lion in payroll, paying out salaries that are 40 percent more than the national average and investing nearly $10 billion in R&D annually. In Connecticut, the medical technology industry directly supports an estimated 7,600 jobs and contributes $4.1 billion to the total eco- nomic activity. Full repeal of the medical device tax would allow the state's med-tech industry to continue to contribute to our nation's eco- nomic strength and global competitiveness. A recent survey of the largest manu- facturers of medical imaging equipment, representing together in excess of 60 per- cent of the industry's sales, confirms that Congress' suspension of the device tax has allowed them to elevate their operations. In fact, 71 percent of companies are likely to hire more U.S.-based employees as a result. This investment in human capital delivers diverse skills, knowledge and experience that are important when trying to bring forth the lat- est medical technology innovation. To date, the industry has created portable imaging equip- ment for prenatal care that reaches expecting mothers in remote or previously inaccessible areas, where larger, stationary machines could not have gone. It has given us pacemakers that allow our parents and grandparents with heart disease to live longer, richer lives. Innovations like these can take decades to transition from an interesting idea into a pow- erful tool. Unfortunately, R&D budgets are viewed as discretionary, even though they are the bedrock of invention, because the fruits they bear do not ripen overnight and are often the first cut when resources are threatened. It is imperative to encourage the 79 percent of manufacturers that have confirmed that they will likely invest additional resources in R&D, as well as expand the number or scope of investi- gative clinical activi- ties and partnerships with universities or other providers, as a result of device tax suspension. This investment is essen- tial to validating new technologies, prod- ucts or applications and bringing them to market quicker to treat patients. But the only way to ensure manufactur - ers are able to com- mit resources as planned is to fully repeal the device tax once and for all. There is no question that this tax is a threat to the medical and economic ben- efits this industry provides for our country. We must urge Congress to complete what it began with the device tax suspension. The stakes are too high. We can't continue to suf- focate an industry whose job is to breathe life into our nation. n Gary D. LeBeau was a Connecticut state sen- ator from 1999-2015 during which time he served as co-chair of the Commerce Commit- tee. He also served as co-chair of the National Council of State Legislators Commerce and Labor Committee from 2010 to 2014 and first chairperson of the state legislature's biparti- san Manufacturing Caucus from 2012-2015. HARTFORDBUSINESS.COM POLL After last week's state and U.S. elections, are you optimistic or pessimistic about the future? ● Optimistic ● Pessimistic ● Uncertain To vote, go online to HartfordBusiness.com. Last week's poll results: Would you buy a home in Connecticut in today's market? 38.1% Yes 61.9% No Gary LeBeau ▶ ▶ Unfortunately, R&D budgets are viewed as discretionary, even though they are the bedrock of invention, because the fruits they bear do not ripen overnight and are often the first cut when resources are threatened. Send Us Your Letters The Hartford Business Journal welcomes letters to the editor and guest commentaries for our opinion pages. Electronic submissions are preferred and welcome at: editor@HartfordBusiness.com.

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