Tax debate heats up

WINSTED — Some local business owners say proposed increases in corporate taxes to help bridge the state’s $8.5 million budget gap could lead to more Connecticut residents losing their jobs during already tough economic times.

Area business leaders voiced their concerns about an increase during a roundtable discussion on the budget with state Republicans at Howmet Castings in the Winsted Industrial Park on Aug. 19.

The talk — led by state House Minority Leader Lawrence Cafero (R-142) and state Senate Minority Leader John McKinney (R-28) — focused on the Democrats’ most recent budget proposal, which calls for a 15-percent increase in corporate tax surcharges.

Gov. M. Jodi Rell’s latest proposed budget includes a 10-percent increase in the corporate tax surcharge.

The company representatives who attended last week’s roundtable said raising taxes during a global economic crisis could not only lead to more layoffs, but to some struggling Connecticut businesses leaving the state or closing their doors permanently.

John Lavieri, president of Barkhamsted-based Sterling Engineering, said that as a small business owner, raising prices on the products his company produces during the current recession would be “as ridiculous as the state’s raising taxes.�

“Connecticut needs to decide if it’s serious about manufacturing and not just give it lip service,� Lavieri said.

Peter Kent, the chief executive officer and chairman of the North Canaan-based Bicron Electronics Company, agreed.

“You don’t raise taxes during an economic crisis,� said Kent, who also serves as the vice chairman of the Connecticut Business and Industry Association. “You can’t tax your way out of a recession.�

Instead, the company leaders urged Hartford lawmakers to make some of the “hard decisions� many businesses have had to carry out to keep their companies afloat over the past several months: across-the-board spending cuts, employee layoffs/furloughs and salary reductions, streamlining and increasing efficiency and reducing employee benefits.

“We’re all in this together, and we all are going to have to make cuts,� Laurie Roy, a human resource officer with Howmet Castings, said, referring to both the private and public sector.

In her $36.9-billion budget proposal, Rell would reduce state spending by $1 billion. The governor’s proposal also calls for $391 million in new revenue by increasing “sin taxes� on alcohol by 10 percent and on cigarettes by $1 per pack, as well as instituting a temporary three-year surcharge on corporate taxes.

The governor’s previous proposals did not include any tax increases.

The Democrats’ $37.9-billion budget also calls for a 75-cent per-pack increase in the cigarette tax and a temporary corporate tax surchage, but raises additional revenue by increasing taxes on wealthier Connecticut residents: up to 6 percent for couples making $500,000, 6.5 percent for couples making $600,000, and 7.5 percent for couples making $750,000. The plan calls for a total of $1.8 billion in tax increases.

Rell has said she would veto the majority’s latest plan. Democrats currently have a 24-12 majority in the Senate and a 114-37 majority in the House.

Earlier this month, Republicans released their own budget proposal, which did not include any tax increases to balance the state’s books. Instead, the plan calls for some $900 million in spending cuts, state agency mergers, offering state workers early retirement as well as state employee salary and benefit concessions.

State Sen. Andrew Roraback (R-30) and state Rep. John Rigby (R-63) attended last Wednesday’s roundtable discussion. Both voted against the Democrats’ latest budget as members of the General Assembly’s finance committees.

State Rep. Roberta Willis (D-64) said, however, that economic experts have concluded that reducing the state’s deficit will require more than just spending cuts — increases in revenue and some borrowing will also be necessary.

“They will all have to be components of a balanced budget,� Willis said.

“This is not an easy thing to do, to balance the budget,� she said.

Responding to concerns that an increase in the state’s corporate surcharge tax could lead to some workers losing their jobs, Willis said Connecticut businesses currently receive some $2 billion a year in tax breaks.

And any cuts in state spending could also lead to layoffs, she said.

“A lot of jobs in this area are at stake with these cuts,� Willis said. “These are all jobs... and we’re not going to settle until we feel we have something that’s right and fair.�

Connecticut and Pennsylvania are the only two states that have not yet enacted a budget since the new fiscal year began on July 1. Since then, this state has been operating on monthly budgets signed into law by Rell as executive orders. This is the longest the state has ever gone without a budget.

Northwest Connecticut Chamber of Commerce President JoAnne Ryan said at last week’s talk that her organization is slated to receive thousands of dollars in federal stimulus money to create a new employee training program.

That money, however, has yet to make its way from the state to the local chamber’s coffers. And so the program has yet to become operational.

“We’ve been told the reason that the money has not yet been realized is because we don’t have a [state] budget,� Ryan said. “And that’s really a sad state of affairs.�

Although a special session of the General Assembly was planned for yesterday and today, no budget talks were scheduled this week between the two sides as of press time.

“People are digging in their heels,� Willis said.