Tax Study Details Reforms Needed for Connecticut’s Success

Published October 30, 2014

As other states are starting to initiate significant tax reform, Connecticut still has not done anything to make its tax climate more business-friendly, despite its recent placement at the bottom of several national rankings and its slow economic growth.

High Taxes Across the Board

Although state officials like to claim Connecticut has a friendly business tax environment because of its 7.5 percent corporate income tax rate, the state’s very high property taxes and relatively high taxes in a variety of other areas account for Connecticut’s failure to fully recover from the 2008 economic crash.

Connecticut has the second-highest per capita property taxes in the nation, and the state levies sales taxes on many business-to-business transactions. Connecticut’s capital stock tax rate, a tax on business wealth, is the worst in the nation, and the state’s gift tax significantly affects small businesses. Connecticut’s alternative minimum tax for personal income taxes is also detrimental to small businesses because many are taxed using personal income tax rates.

Some state officials claim that Connecticut has made significant efforts to improve its business climate through endeavors like Gov. Dannel Malloy’s (D) First Five “job creation initiative,” a program that grants tax credits and other incentives to businesses that create a specified number of new, full-time jobs between 2011 and 2015.

A study by the Tax Foundation released in October 2014, however, says that business incentive programs do less to help states attract and retain businesses than a business-friendly tax environment does. In other words, it is better to have an enduring business-friendly tax structure than to have short-term programs like Connecticut’s First Five program.

 Until Connecticut’s state officials make real efforts to transform the Constitution State’s suffocating and destructive business climate, businesses and entrepreneurs will continue to move on to greener, more lucrative pastures in other states.

Suzanne Bates ([email protected]) serves as policy director for the Yankee Institute for Public Policy, based in East Hartford, Connecticut. An earlier version of this story appeared at the Yankee Institute’s website at . Reprinted with permission. 

Internet Info:

“2015 State Business Tax Climate Index,” Scott Drenkard, Tax Foundation,