A Democratic “jobs” bill that taxes large bonuses paid by companies that got federal bailouts to pay for a small-business tax break passed the Senate Friday mostly along party lines.

The bill eliminates the annual $250 business registration fee for small businesses, taxes bonuses over $500,000 from companies bailed out by the federal government and creates a $20 million low-interest loan pool for small businesses struggling to get loans.

Republican Senators were quick to criticize the bill saying taxing “excessive” bonuses over $500,000 of workers is hardly sending the message Connecticut is business- and jobs-friendly.

Sen. Toni Boucher, R-Wilton, said the bill is “anti-job, anti-employee, anti-residents, anti-business. This counters the underlying goal of the bill which is job creation.”

The legislature non-partisan Office of Fiscal Analysis said they are unsure just how much the 3 percent tax would generate. An earlier OFA report on the original proposal to tax bonuses over $1 million estimated the tax would bring in $9.4 million — much less than the $24 million needed to pay for the elimination of the business-registration tax.

Senate Democrats said eliminating the tax would effect 48,000 small businesses, which employ 97 percent of the state’s workforce, and the tax on “excessive” bonuses should pay for this.

“This is not a punishment,” said Senate Pro Tem Donald Williams. “Folks will still be paying more under the New York tax scheme.”

Republican Gov. M. Jodi Rell has said she will veto the tax, because it is questionable if it is even legal. Critics say it is illegal to single out employees of certain firms and it violates due process by applying a tax retroactively.

But Attorney General Richard Blumenthal issued an opinion saying 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.

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.

The bill passed the Senate 21-14, three votes shy of overriding the threatened veto. The vote was along party lines with the exception of two Democratic Senators from Fairfield County voting against the bill: Andrew J. McDonald and Bob Duff.

It will now head to the House for final passage, but House Majority Leader Denise Merrill, D-Mansfield, said because of the “unclear ” legal challenges and the lack of veto-proof majority support in the Senate, she only plans to bring the bill up for debate “if we have time and if we think we have the votes.”

She also cast doubt on how much of a “jobs bill” it is.

“I don’t see that as a comprehensive bill that will turnaround our economy,” she said, acknowledging the House’s “jobs bill” does more to stimulate the economy, is less controversial and “has a better chance of being signed into law.”

The House bill creates a tax credit for those who invest in start-up businesses and creates a loan pool for small businesses.

Jacqueline was CT Mirror’s Education and Housing Reporter, and an original member of the CT Mirror staff, joining shortly before our January 2010 launch. Her awards include the best-of-show Theodore A. Driscoll Investigative Award from the Connecticut Society of Professional Journalists in 2019 for reporting on inadequate inmate health care, first-place for investigative reporting from the New England Newspaper and Press Association in 2020 for reporting on housing segregation, and two first-place awards from the National Education Writers Association in 2012. She was selected for a prestigious, year-long Propublica Local Reporting Network grant in 2019, exploring a range of affordable and low-income housing issues. Before joining CT Mirror, Jacqueline was a reporter, online editor and website developer for The Washington Post Co.’s Maryland newspaper chains. Jacqueline received an undergraduate degree in journalism from Bowling Green State University and a master’s in public policy from Trinity College.

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