Finances, Legislative Session ‘Pathway to Rebuilding Connecticut’ |

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Budget, Legislative Session 'Pathway to Rebuilding Connecticut' |

The Connecticut General Assembly approved a two-year state budget of $ 46.4 billion with strong bipartisan support on the last day of the 2021 legislature.

The budget, which does not include large-scale tax increases, was passed by State House 116-31 and Senate 31-4, with many Republican lawmakers joining the Democratic majorities.

The budget passed both the State House and the Senate with broad bipartisan support.

Government spending will increase by 2.6% in budget year 2022 and 3.9% the following year, based on the budget that makes large investments in community aid, education, nonprofit providers and human resource development.

Legislature left the state’s record of $ 3.5 billion in rainy days funds untouched and used $ 1.75 billion in federal COVID-19 relief funds while transferring excess dollars from the current year to the underfunded state Pension scheme for employees.

CBIA President and CEO DiPentima praised Governor Ned Lamont and lawmakers on both sides of the aisle for opposing proposals for tax hikes of more than $ 1 billion.

“We’re going to close this year with a $ 500 million surplus, a record rainy day fund and billions in federal aid,” he said. “We are grateful that so many policy makers have recognized this and rejected proposals that would undermine our economic recovery.

“From a state budget without large-scale tax increases to significant targeted investments in our cities, human resource development and childcare to historic unemployment reforms – this session sets the course for the recovery of the state.

“Overall, there are numerous reasons to be optimistic about the future of the state based on the action taken by lawmakers and the Lamont administration over the past five months and the wide range of favorable economic news that we have turn the wind on your back. “

Reconstruction of Connecticut

DiPentima said the meeting addressed most of the Organization for the Reconstruction of Connecticut’s political priorities, designed as a roadmap for job creation and economic growth, and thanked the bipartisan group of 55 state lawmakers who made the political pledge for their Had signed support.

“Before the beginning of the meeting we called for a rethink, for real cooperation and non-partisanship, so that we can use the many strengths of the state and not only restore our economy, but make it more robust than ever,” he said.

“We are grateful for the degree of bipartisanism within this year’s legislature, for the willingness to cooperate with business and other groups and for the willingness of important legislative voices to express their views on critical economic and tax issues.”

Governor Lamont and the General Assembly received high marks from the CBIA this year, with the business lobby applauding elected officials for passing a state budget without new taxes, reforming unemployment benefits and increasing investment in cities / wcTJFHB85g

– Hartford Business (@HartfordBiz) June 10, 2021

DiPentima acknowledged employers were disappointed that lawmakers had decided to keep the 10% temporary corporate tax surcharge, postpone the abolition of the capital base tax, keep sales tax on personal protective equipment and training, and not restore the transit tax credit.

“We mustn’t lose sight of the essentials. We need to continue the fiscal discipline of the past few years that has resulted in sales growth, a healthy rain day fund, and Wall Street recognition through state credit upgrades, “he said.

“We must continue to fuel economic growth through policies that promote businesses and the opportunities they create for our communities and all of our residents, as the pandemic demonstrated.

“And let’s make sure we continue to attract residents and businesses to the state and take advantage of the competitive advantages that New York and Massachusetts are giving us through their tax policies.”

Highlights

Budget highlights:

  • No “consumption tax”. This proposed tax hike was not related to consumption and was in fact just a surcharge on income tax. It would have generated between $ 500 million and $ 800 million a year in new revenue.
  • No digital ad tax. This tax, which targets media advertising platforms, would have generated an estimated $ 150 million to $ 175 million a year, all of which would have been passed on to the many companies that advertise online.
  • No increase in capital gains tax. The finance committee proposed a 2% surcharge on capital gains that would result in additional income of $ 262 million per year. The governor was steadfast against this proposal from the day the session opened.
  • The R&D tax credit will be restored to 70%. This takes place in two stages, starting with the budget year 2022. It should be noted, however, that the carryforward of new R&D tax credits is limited to 15 years.
  • The company surcharge will remain temporary and will extend until 2022. While this “temporary” tax may never go away, moving the expiration date instead of making it permanent as originally suggested prevents it from being added to the liabilities side of various filings by publicly traded companies.
  • The exit from the capital tax will be postponed until 2024. The property tax is due to expire this year. However, shifting the sunset date by a few years brings the state about $ 90 million over a three-year period.
  • No taxes / income from the traffic climate initiative. The multi-state agreement would generate approximately $ 100 million in revenue from fuel wholesalers that would ultimately be passed on to consumers at the pump.
  • No health insurance assessment. The HIT tax should be levied by our country’s health insurance companies in order to provide additional health insurance subsidies for certain population groups in our country. The problem, however, is that the rating would ultimately be passed on to small businesses in the form of higher rewards.
  • No wage tax. The $ 50 million a year the state would have earned by maintaining part of a voluntary employee income cut that would have been offset by tax credits was not worth the administrative headache it would have created for companies.
  • No highway tax – a $ 90 million per year tax on large tractor units wasn’t enough. However, the legislature has approved it as an independent measure.

Other points worth mentioning:

  • There will be a tax amnesty period from November 1, 2021 to January 31, 2022, which will remove penalties for late payments and cut interest rates by 75%.
  • A new convenience fee will be charged for payments to the state with credit cards

Unemployment fund, personnel development

The budget also provides $ 155 million to help tackle the state unemployment fund’s debt crisis. Employers are responsible for repaying the expected $ 1 billion in federal loans taken out by the state to cover historical unemployment claims.

CBIA led small businesses and urged the state to use federal COVID-19 relief funds to ease the burden on employers, with that debt threatening Connecticut’s post-pandemic economic recovery.

The budget also provides $ 155 million to help tackle the state unemployment fund’s debt crisis.

The budget includes key human resource development initiatives:

  • $ 250,000 per year for the Office of Workforce Strategy
  • US $ 300,000 for Public Health and Pandemic Preparedness
  • $ 171 million for the separation of Connecticut’s technical education and career system from the State Department of Education
  • $ 8.8 million in federal childcare grants
  • $ 14 million in fiscal 2022 and $ 15 million in fiscal 2023 for the Debt-Free Community College
  • Approximately $ 105 million annually to nonprofits
  • An increase in community funding of more than $ 120 million annually
  • $ 140 million in educational participation in local school districts

Remote workers

The legislature also included a number of other changes to tax law and tax policy that are important to the economy.

Another important change, adopted at the beginning of the session, related to the taxation of workers who used to commute to work outside of the state but are now teleworking.

HB 6516 Prohibits the state’s Department of Revenue Services from establishing a nexus in an attempt to tax the income during the 2020 tax year of Connecticut residents who have started telepending to jobs outside of the state due to the pandemic.

Much applause in the bipartisan state budget, including:
✅ No large-scale tax increases
✅ $ 3.5 billion rainy day fund left intact
✅ $ 155 million to solve the Unemployment Fund debt crisis
✅ Restoration of R&D tax credit to 70%
#RebuildCT https://t.co/S8drJo6b8b

– CBIA (@CBIANews) June 10, 2021

Under the employer’s “convenience rule”, employees typically pay tax in the state of their employer and then receive credit for all Connecticut tax obligations.

HB 6516 made it possible for employers who no longer commute across national borders to continue to receive this credit.

Because the bill was only in effect for the 2020 tax year, workers who continue to telework instead of commuting across the border will be taxed in Connecticut in the coming year.

For more information on government tax policy, contact Eric Gjede of CBIA (860.480.1784) | @egjede.

For more information on government spending, contact Ashley Zane at CBIA (860.244.1169) | @ AshleyZane9.