Tax Transparency Bill Clears First Hurdle
A bill proposed by state Comptroller Kevin Lembo that would require the state to develop a searchable online database for economic development projects cleared its first hurdle Friday.
The Finance Committee approved the bill, but not without a few changes. The creation of the online database of state-funded economic development projects made it through unscathed, but a proposal to require a “tax incidence analysis” of the state’s tax structure was pared down.
Only taxes that raise more than $100 million or more will be studied as part of a biennial tax incidence report.
Sen. Gary LeBeau, D-East Hartford, said the last time the state did a tax incidence report was 1991 or 1993. He said a report that looks at the impact of certain taxes on certain parts of the population is a long overdue.
“I don’t think we really know how our taxes are having an impact on different groups and certain people,” LeBeau said.
The legislation has received opposition from Gov. Dannel P. Malloy’s administration.
The report is expected to cost the state an additional $300,000 biennially and that cost is not included in Malloy’s budget proposal.
“Although many of the ideas expressed in this bill are laudable, there would be significant financial costs and staff time commitments in meeting several of the bill’s initiatives, specifically the searchable database for economic assistance programs and the tax incidence analysis report,” Office of Policy and Management Secretary Ben Barnes told the Finance Committee in March when they were debating the bill.
The business community also is concerned about what data would be included in the legislation.
Rep. Sean Williams, R-Waterford, voted against the bill Friday to flag it for further negotiation. He said the goal of the bill is laudable, but he worries about the tax incidence report and giving away proprietary information even in the aggregate.
He said if the report offers up information about the tax burden of specific industries, it wouldn’t be hard to figure out what submarine company pays what taxes in the state even if information was given out without the name of the company attached.
Joe Brennan, vice president of government affairs for the Connecticut Business and Industry Association, said he is also concerned about the legislation.
“It depends on who does it and how it’s done,” Brennan said.
He said there’s also a concern about company-specific data getting out there and encouraging protesters to show up at specific businesses to say they don’t pay their fair share of taxes. He said that doesn’t move the state of Connecticut forward and it could make the state a less competitive place to do business if it’s not done properly.
Brennan’s fear of protesters is very real.
In 2011, protesters took to the streets against big corporations like Bank of America, which they alleged didn’t pay its fair share of corporation taxes. The protesters also showed up at Malloy’s town hall meetings to publicize their discontent with Connecticut’s tax structure.
At the time, information from the Department of Revenue Services showed an estimated 66.3 percent of the 42,157 companies filing Connecticut corporation taxes in 2008 owed nothing or just $250 after all tax credits were applied. That’s according to this report by the Department of Revenue Services.
The most recent report using data from 2010 showed an estimated 66.6 percent of the 40,490 companies filing Connecticut corporation taxes in 2010 owned nothing or just $250 after all tax credits were applied.
In 2010, 40,940 corporations paid the state $448.9 million in corporate taxes after all the credits were applied. Before the tax credits, their corporate tax liability was $585.5 million.
But Department of Revenue Services Commissioner Kevin Sullivan has said the tax liability calculation doesn’t account for other tax liabilities that corporations face, such as sales, property, payroll, or unemployment taxes.