With hundreds of millions of dollars worth state tax credits and exemptions on the books, a Groton lawmaker says Connecticut should disclose which specific businesses enjoy tax breaks, and how much in savings each one receives.
But while Rep. Edward E. Moukawsher‘s bill recently received a public hearing, both Gov. Dannel P. Malloy’s administration and the state’s chief business lobby are fighting it, arguing it could create public unrest and send a negative message to companies looking to locate or expand in Connecticut.
“These exemptions and credits cost towns a great deal of money. The cost the state a great deal of money,” said Moukawsher, a five-term Democrat who serves on the tax-writing Finance, Revenue and Bonding Committee. “I think we’ve warped our tax system so much with these benefits bestowed on different sectors.”
Not all tax breaks ordered by statute are aimed at companies. But there are more than $300 million in corporation tax credits and exemptions, and another $300 million connected to either public service or petroleum companies.
Legislatures and governors have built a network of tax breaks over the past few decades that have shifted a considerable tax burden away from businesses in general — and larger companies in particular — and onto residents and small businesses, Moukawsher said. “It seems like our (finance committee) agenda is always full of different interests and businesses looking for tax breaks,” he said.
And though the aggregate cost of these tax breaks can be researched easily, taxpayers won’t be able to properly judge whether those public benefits were worthwhile unless they know who got them and how for how much, Moukawsher said. His bill would require the Department of Revenue Services to compile an annual list for public disclosure that would identify each business receiving tax breaks, and the full value of those credits and exemptions.
“Are the companies receiving these credits creating jobs?” he added. “How many? People need to know which businesses are being favored and at what cost. And then they should judge.”
Connecticut Voices for Children, a nonprofit advocacy group for a strong social services network and a progressive tax structure, echoed Moukawsher’s concerns at a Finance committee public hearing last week.
“Tax expenditures have been quickly eroding Connecticut’s corporate and insurance premiums tax base,” testified Joachim Hero, a researcher for the group, who said Connecticut’s state and municipal business tax revenue ranks among the lowest in the nation when viewed as a share of private-sector economic activity. “For many of these expenditures there is no public disclosure of who receives them, in what denomination, or for what specific purpose.”
But both the Connecticut Business and Industry Association and the Malloy administration argued that this level of public disclosure would drive jobs out of state.
“No other states are releasing this type of company-specific data,” said Bonnie Stewart, the CBIA’s tax policy specialist, who argued it would immediately put Connecticut companies at a disadvantage.
An out-of-state firm could gain insights into a Connecticut competitor’s plans for research or capital expansion by reviewing the credits applied for and received, she said.
“It could make a big difference to a company developing a new product or modifying an existing one,” Stewart said, adding that a full disclosure system might lead many businesses to fear credits might be repealed — and hold off on plans to add new jobs. “For businesses, certainty and predictability is key,” she said. “This could lead them to believe they can’t rely on what’s on our books.”
Two Malloy administration officials made similar arguments during last week’s committee hearing.
“This proposed legislation is in opposition to our state’s efforts to foster a business-friendly environment,” testified Department of Economic and Community Development Commissioner Ronald F. Angelo Jr., who added that the bill has the “potential” to disclose a company’s proprietary information.
Malloy’s budget director, Office of Policy and Management Secretary Benjamin Barnes, testified that “the disclosure of such information could create citizen angst against certain companies receiving the credits/exemptions” and “would send the message that Connecticut is ‘closed for business.’”
But Moukawsher argued that the administration officials’ testimony runs counter to the principals of transparent government and accountability that Malloy stressed both throughout last fall’s campaign and since taking office in January.
“I’m actually disappointed because the governor has made the point quite often about transparency,” Moukawsher said, adding Malloy also has criticized past administrations and legislatures for awarding tax breaks and not assessing their effectiveness later. “Here we have an opportunity to compile that data and analyze it.
Sen. Eileen Daily, D-Westbrook, co-chairwoman of the finance committee, said she agreed with the Malloy administration and the CBIA that there are “significant concerns” about the bill’s potential to disclose competitive data about a company, but added she hasn’t reached any decisions about the bill. The committee has until April 27 to act on measures raised in the 2011 legislative session.