Rell wrote lawmakers Wednesday saying launching the tax would be “irresponsible” because there are questions whether it is even legal. If a court throws out the tax, the deficit would only increase, she wrote.
Attorney General Richard Blumenthal released his opinion Tuesday, saying the tax on employees who earned bonuses in excess of $1 million from the eight firms in Connecticut that received money from the federal bailout last year is “likely constitutional.”
Critics, including Republicans and some in the business community, say it illegally singles out employees of certain firms, and violates due process by applying a tax retroactively.
But Blumenthal said the tax is within the state’s taxing authority, and the U.S. Supreme Court has repeatedly upheld retroactive taxes.
“The proposed legislation is likely to survive constitutional scrutiny,” he said.
Rell said his opinion is “hardly a steadfast legal endorsement” and has received an opinion stating it would not be upheld in court.
Several proposals have been made in Congress to tax these bonuses with no success, and the Congressional Research Service said the tax is vulnerable to being found unconstitutional for a number of reasons.
Senate President Pro Tem Donald E. Williams, Jr. of Brooklyn estimates the 3 percent tax surcharge would bring in about $30 million and allow the state to eliminate the $250 annual business registration tax for 46,000 small businesses.