Report: CT Business Taxes Lowest of Any State
by Hugh McQuaid | Aug 4, 2011 5:38pm
Google
(16) Comments | Commenting has expired
Posted to: Business, Nonprofits
CT Voices For Children Chart
Last year state and local business taxes made up only 3.3 percent of Connecticut’s private sector economic activity, making it the state with the lowest business tax burden in the country, according to a report by the Council on State Taxation.
The Washington D.C. - based nonprofit compared the corporation business tax among states along with a host of other taxes that impact businesses including property taxes, sales taxes on business inputs, and unemployment insurance as well as others.
It found that Connecticut ranked at the bottom of the country for tax burdens on businesses, well below the national average of 5 percent of private sector activity.
In a summary of the report the nonprofit think tank Connecticut Voices for Children said the findings were evidence that business taxes are not the root of the state’s persistently high unemployment rate.
“The point we’re trying to make with this report is you hear all this talk about Connecticut having the highest taxes on businesses. It’s unfounded if you look at it,” said Wade Gibson, a senior policy fellow for the group.
Peter Gioia, vice president and economist of the Connecticut Business and Industry Associations, said the study ignores much of what makes the cost of doing business in the state so high.
Many of the tax figures used had to be estimated, he said, but added that taxes are only one of many avenues one should look at when comparing business costs between states. He said the COST report even includes a caveat, saying it should not be used for comparative purposes.
Numerous other studies, some conducted by Moody’s and the Business Council of New York, consistently paint the cost of doing business in Connecticut higher than the national average by no small measure, he said.
“When I look at what affects businesses taxes are one element but there are multiple elements involved,” he said
On that point at least he and Gibson agreed. Finding ways to relieve businesses of taxes is not the way to create more jobs, Gibson said.
The high cost of energy, healthcare and transportation factor more heavily into the operating cost of the average business, he said.
Gibson is hoping Gov. Dannel P. Malloy and the legislature will use an upcoming special legislative session aimed at improving job growth in Connecticut, to address those issues rather continue to look for ways to cut taxes on businesses.
“For many years, Connecticut’s economic development efforts have been heavily focused on tax subsidies for big businesses,” he said. “In light of 20 years of anemic job creation, this study suggests that strategy is misguided.”
His comments come the same month Malloy added sports broadcaster ESPN as the third company in his “First Five” program, in which the state offers tax incentive and loans to companies promising to create at least 200 jobs.
On Thursday Gibson said he supports Malloy’s program.
“It’s a good first step in the short term to help get us out of a recession,” he said.
But it doesn’t address those other factors that do more to drive the cost of doing up business in Connecticut.
“What we would like the governor to do is take a look at Connecticut’s economic situation and ask how we can fix these structural issues to create job growth,” he said.
“[First Five] is helpful in the short term but the jobs special session is a great opportunity for long term planning to fix the economy.”
Malloy’s spokeswoman Colleen Flanagan said the governor has been approached by a number of people with different ideas on to help encourage job growth, which remains his number one priority. The agenda for the special session has yet to be finalized, she said.
Tags: CT Voices for Children, CBIA, business, taxes, Hugh McQuaid
(16) Comments
posted by: skydogct | August 4, 2011 9:54pm
Another myth vaporized, it’s great to read a positive piece regarding doing business in CT. Contrary to the habitual negative naysayers, CT is a great place to run a business, and raise a family. That’s if there are any business people left in CT. I heard a rumor they all moved to Texas. It was probably started by one of those conservative think tanks 
? It might be a surpise to some folks but Denmark was recently rated by Forbes as the #1 country to run a business. Not because of low taxes but because of it’s quality of life.
posted by: Mr.Kruger | August 5, 2011 6:26am
Well, looks like Malloy, Califero and the rest of the political elite including SEBAC are all hoping this bit of information didn’t leak out before we gave concessions. WOW the lowest state, meaning, we state employees, are the best bargain for the Connecticut populus. Maybe the naysayers will listen to us now. STOP THE VOTE!!!!
posted by: DirtyJobsGUy | August 5, 2011 9:11am
Looks like they are only talking about the corporate income tax and other fees. One thing to remember is that if you are not making much profit you don’t pay much income tax. (note the year FY 2010) So in one of the worst business years in the last 20 years, CT companies didn’t pay much income tax. Whoop de do. These kind of studies pop out all the time to try to defend CT’
s high cost of everything. How about measuring how big the hit would be if your are adding machinery, people and making money. CT would be very very high on that list. And that’s the one that counts in job creation and expansion.
posted by: ASTANVET | August 5, 2011 10:13am
HAHHAHA… you know anyone can publish a graph and you believe it. Just google “CONNECTICUT CORPORTATE TAX RATE” and you’ll see that the published flat corporate tax rate for CT is 7.5 not 3.3. You people are just too funny. So, what “myth” does that vaporize skydog??? Too funny, I don’t know if you guys have spent much time on a farm, but you should really watch sheep behavior.
posted by: Disgruntled | August 5, 2011 10:30am
Texas is in fact luring hedge funds. In a word,it is all about TAXES.
Now,having grown up in a place very much like Texas,I would not want to go back BUT with no income tax,a working death penalty,unimaginable wealth…it is worth looking at.
What would happen if Bridgewater decided to leave Ct.? SAC? Any number of minor players that might create a stampede.
Taxes.They do have an impact. Sure,they have NYC desks and reps but the center of the hedge fund universe stateside is slowly becomming Texas.
posted by: GoatBoyPHD | August 5, 2011 10:31am
The same interest group COST publishes another study ranking CT as the 38th least desirable state to open a new business and make business onvestments based on tax burdens and labor cost.
The study referenced above ranks taxes as a percentage of state product which is an inexact science for any meaningful measurement.
Check out Delaware as another example. Companies incorporate there for income tax purposes but don’t necessarily operate there.
To get an idea of how CT is bleeding corporate jobs look at this: back in the day (early Reagan era) CT was home to over 40 Fortune 500 companies. Today it is 11 or 12. The bleeding started in the late 80s
http://tinyurl.com/3rbsn4l
posted by: BMS | August 5, 2011 10:58am
The published corporation tax rate is 7.5%. The very generous tax credits allow up to 70% of the tax due to by offset by tax credits. The net tax rate after offset is 2.25%.
posted by: NOW What? | August 5, 2011 11:49am
Ever since CBIA’s creation, Goia and the CBIA have been disingenuously harping on state taxes and the cost of running State government as being the “jobs killers,” and almost always focusing on things at the State level that affect big business. FINALLY Goia’s admitting that taxes in and of themselves are not the problem and that the needs of small businesses are at least as important as those of large corporations.
But one of the reasons he’s now talking about the needs and problems of small businesses is because the State employee *unions* have been reaching out to the state’s small businesses by urging the State to allow small businesses and their employees to participate in the State’s health insurance plans as a cost-saving measure… and thus directly “competing” with the small business health insurance plans that CBIA *itself* sells to its small business members. And the only reason why he’s now FINALLY acknowledging that it’s the *overall* cost of living, the cost of local property taxes, and the costs of engaging in business-to-business transactions in CT is because he no longer has any CHOICE - his small business membership has been trying to tell him this for YEARS, and now objective data backs up their assertions.
posted by: GoatBoyPHD | August 5, 2011 3:26pm
Steve HC there are two different scenarios: what makes a business leave and what makes a business grow.
Starts up often do not have income. They may run at a loss for a decade or more capturing revenue and market share through acquisitions or organic growth. Their business costs are traditional property, regulatory,and labor.
Mature income earning businesses are a different scenario and Goia’s org traditionally was more vocal for that group of more mature businesses.
CT needs more growth businesses and needs to retain the existing income producing companies.
Frankly, no one in CT needs SEBAC except SEBAC. That doesn;t eman we don’t need state services and employees/ We just don’t need public sector unions. They exist for themselves and for their own benefit and have a right to do so.
posted by: CitizenCT | August 6, 2011 7:32am
CT places onerous mandates on businesses. Energy and fuel costs are near or highest in the nation. These factors impede the ability of CT businesses to compete, so they make lower profits. So of course the pay less income tax as a percent of private sector activity, it’s because they make less money. Get rid of the noose Gvt has around business, then business profits and taxes remitted to the state will go up.
posted by: ALD | August 6, 2011 10:28am
What a joke…... I suppose if I took a photo of a beautiful sunny day in CT I could conclude it never rains or snows here too? So I guess we like so many in our General Assembly should conclude jobs,business,and our young people are all leaving this state because taxes are too low??
posted by: gutbomb86 | August 6, 2011 11:11am
Certainly is an interesting perspective. Numbers can be cooked to appear in a lot of different ways so it’s probably best to look at one study for what it is - one study. Is CT really unfriendly to business or is it simply expensive to access a marketplace with more than 3 million people in a small area?
One thing is for sure, it’s really tough to get people to give you money for doing nothing. That’s pretty much what most people want. More for less.
I would argue that there’s probably a lack of demand in CT. Businesses are created by demand for a product or service. CT is a state full of bedroom communities where a large portion of the population has everything they need to get by comfortably. Thus it could be argued that there’s a lack of demand. I’m certain that there are a lot of people complaining about CT’s business climate and taxes on this website, but they also have 4 smartphones in their home and multiple flatscreen TVs that are about as big as the footprint of a Smartcar.
Come up with a new product that people want, and you’ll do fine in CT. How many iPhones and iPads have been purchased in CT in the last year or so? Too many to count, but everyone complains that they can’t afford to pay their taxes. Well… that’s B.S.!
Maybe CT consumers are tired of some of the services and products being offered here. But sucking all the air out of the room with complaints about taxes doesn’t help when your perspective is skewed by your ridiculously high living standard. That includes spending $50-$70 million on political campaigns designed to define the state as “unfriendly” to business. CT may never recover from those massive messaging campaigns by McMahon and Foley. They burned the forest to save the trees.
posted by: Susan Jane Bigelow | August 6, 2011 4:11pm
Many comments here about how this can’t be right, because we all “know” CT is “bad for business.” But what do we really know? What if the conventional wisdom is absolutely wrong?
posted by: gutbomb86 | August 6, 2011 7:09pm
@susan - couldn’t agree with you more. After the last election cycle, CT residents are now programed in the Pavlovian sense to salivate every time someone complains about taxes or the business climate here. It’s pathetic and unrealistic.
posted by: ALD | August 6, 2011 7:50pm
“Many comments here about how this can’t be right, because we all “know” CT is “bad for business.” But what do we really know? What if the conventional wisdom is absolutely wrong?”
When business looks to locate it does more due diligence than this report. The bottom line is can a business make money. It is important to understand that jobs are a by produce of the ability of any business to make money.
Making money among other things is a direct function of total costs. Business taxes are just one component of those total costs. As I read this report it is measuring direct tax burden on business…. NOT other costs that are functions of more indirect tax burdens, like the high cost of labor because of high property taxes for example. Or the high cost of energy because of less obvious taxes like Gross Receipt Taxes. This list could go on and on.
Obviously there are many who would love to site this report as proof that “conventional wisdom has been wrong” for years. So if I were to make the same conclusion I would then be left with the next question. Why then is Malloy wasting millions of our scarce tax dollars to bribe companies to create a few jobs when at the same time so many jobs are still leaving the same state this report suggests is a business paradise at least from a tax stand point?
Could other matters, for example, concerns like the hugely under funded state pensions the average taxpayer is now are finally learning about, but any business doing proper due diligence for many years now would considered when considering CT’s suitability for it’s business be concerning?
Even if I were to 100% buy into this report’s conclusion from a tax stand point, I’d suggest when asking yourself if CT is good or bad for business you need to ask many more questions. The most important being what then is the real reason business and jobs been leaving this state for years?
posted by: NOW What? | August 8, 2011 2:58pm
Connecticut is NOT particularly “good for business,” but NOT because of taxes or business (or construction) - related regulations.
1. Out of the 50 states, Connecticut is the ONLY state that doesn’t have even *one* decent, safe and “livable” major city - it doesn’t have even ONE.
2. Many of Connecticut’s more rural areas - which often have larger tracts of land available for industrial development - offer a very nice quality of life, but they are too expensive; the rest are under-developed and almost poverty-stricken, perpetuated in part by State Aid to Municipalities. Aside from public school aid, such economically under-performing areas should get NO state aid unless and until they develop their own meaningful and viable economic development plans - including property tax breaks to smaller businesses that can produce adequate start-up capital and business plans that can be expected to be successful.
3. In Connecticut the cost of electricity, oil, natural gas, gasoline, diesel fuel, business-to-business transactions, healthcare and essentially ALL professional services are *outrageously* high. The State’s recently-passed “energy” bill is a good first step in the right direction, but ONLY a first step. Competition to the electricity DELIVERY system *must* be introduced to help drive its cost down, most likely by encouraging one or more non-profit electric CO-OPs. Strategies similar to the “energy” bill’s one for electricity procurement need to be developed and implemented for at least oil if not natural gas as well. “Zone” fuel pricing - at least within the state - MUST become *prohibited*. And the State must develop strategies to encourage professional services providers to lower their costs.
4. Connecticut still has NO “quick and easy” way for Connecticut-based companies to get their staff to and from their business partners in New York City, Boston, and other major metropolitan areas. New and innovative ways of rectifying this deficiency *must* be found if Connecticut is to be seen as an attractive place to locate businesses that service national and/or international clientele.
5. Relatively large new businesses require relatively large tracts of cleared, leveled land - most of which are currently NOT “construction-ready” and are in the state’s relatively undeveloped and more rural areas. Quick and easy access from these areas to major trucking routes must be made available, and there must be at least potential access to all utilities as well. If cities, towns and/or smaller geo-political entities are not willing to do these things they should receive NO state aid.