Business group cries foul over extended levies

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The state's largest business association said Wednesday that it was disappointed by Gov. Dannel P. Malloy's decision to extend tax surcharges that he had promised were temporary.

Reimposing the surcharges may have allowed Malloy to say that his budget contained "no new taxes," but the Connecticut Business & Industry Association questioned the long-term consequences of extending the levies, which were instituted two years ago as an emergency budget-balancing measure.

"Our priority is getting the economy moving," John R. Rathgeber, president and chief executive of CBIA, said in a phone interview. "Until we restore business confidence in this state ... we are not going to end this budget shortfall."

The surcharges most notably affect taxes on electric-generation facilities and corporations over the next two fiscal years. These levies alone are expected to bring more than $270 million to state coffers over that period.

Another measure that was set to expire, a limit on the insurance premium tax credit, will bring in additional revenue if it is extended as well.

Steven Lanza, a University of Connecticut economist, said it is understandable that Malloy, under severe budget pressure, would grasp for revenue sources already in place rather than propose new taxes. But, he said, the governor and legislature are putting their credibility with the business community on the line if they promise the sunsetting of taxes that never go away.

"If taxes come and go, I think you can kind of get away with that," Lanza said. "But if the business community thinks that this one is here to stay, they're going to re-evaluate their position and probably interpret this tax now as essentially a permanent fixture."

"One of (the) most important criteria for (a) business person, whether large or small, is that there is some assurance of predictability," said Tony Sheridan, president and chief executive of the Chamber of Commerce of Eastern Connecticut. "When the state makes a commitment to eliminate a tax ... that's a commitment; business people run with that and say, 'Good, we can plan the next couple of years.'"

Ken Holt, a spokesman for the power-generation firm Dominion, said the extended surcharge inevitably will show up in rates state residents pay for electricity - rates that are already the highest in the continental United States. Dominion's tax alone would be $42 million a year under Malloy's plan, while the traditional-energy industry as a whole - coal, natural gas, nuclear and oil - would pay a total of $76 million annually.

Connecticut is the only state in the nation with a broad-based tax on the production of electricity, Holt said.

"We're disappointed with the governor's decision to break his promise," Holt said in a phone interview. "By reintroducing the tax in this budget, customers will be the ones to ultimately bear the burden."

Rathgeber of CBIA said the General Assembly needs to work hard to find more spending cuts, focusing on a lean bureaucracy while spending money on education, public safety, infrastructure improvements and economic development.

"We need to aggressively pursue policies that will grow the state's economy and close out what has become an endless cycle of budget deficits," he said in a statement. "Connecticut must make its tax system more competitive if we're going to attract private investment, allow businesses to grow and get people back to work."

l.howard@theday.com

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