Complex State Taxes Holding Back Business Growth

Apr 17, 2012

Business advocates told an official hearing this week that Connecticut’s tax structure is too complex and too changeable. WNPR’s Harriet Jones reports.

Governor Dannel Malloy has appointed a task force to consider the state’s business tax policy and how it can be made to serve the needs of economic development in the state. Advocates often accuse the state of being a high-cost place to do business in part because of its tax structure. Alan Leiberman of Shipman and Goodwin in Hartford is an expert on tax law. He told the task force the other problem is that the rules change too frequently.

“We understand it’s clearly the prerogative of the government to look at the tax regime whenever it feels appropriate. But we want to make sure that it’s understood, when you have open public hearings, when you consider wholesale changes, when you draft legislation and have it subject to public hearings, even when the legislation doesn’t get passed, it reverberates throughout.”

Accountant Patrick Duffany of JH Cohn in his testimony said the sheer complexity for many companies of complying with state tax law has a chilling effect on economic development.

“State taxation especially is an extremely complex area. I’ve been doing state tax for nearly 20 years, and state and local taxes are more complex now than ever, and state tax professionals expect the complexity – I think everyone expects the complexity – to increase as states continue to look for revenue.”

The task force is co-chaired by Catherine Smith, the Commissioner of Economic and Community Development and by Kevin Sullivan, the Commissioner of the Department of Revenue Services. Sullivan mused that everyone seems to want to talk about taxes, but the discussions are usually about cuts and credits for individual industries and not about making the system work.

“How do we find the forum where advocates will come in and not talk about what they want, but what Connecticut needs? Where legislators will not talk about my favorite tax or least favorite tax, but what it will do to the state of Connecticut? Where businesses will not talk about this is good for me, but it’s good for everybody.”

But CEO of the Connecticut Business and Industry Association, John Rathgeber says he does believe there’s a role for tax policy to incentivize wealth creating industries to locate and grow in Connecticut.

“We’ve got that diversity of economic base industries, so if we do things right, we’ve got a great future. And we don’t have to reinvent our economy in the state of Connecticut, we’ve got to energize our economy and give confidence to those people who are here that this is the right place to invest and grow.”

This was the first official public hearing for the task force, which is due to continue its work into the fall, when it will present a series of recommendations to the governor.

For WNPR, I'm Harriet Jones.