Republican Gov. Bob Stefanowski’s challenger on Tuesday unveiled a $640 million relief package that would save businesses from repaying hundreds of millions of dollars owed to the Connecticut Unemployment Trust.
Stefanowski’s project would also expand tax credits for research and development, strengthen relief for sole proprietorships and certain other small businesses, and repeal new taxes on restaurants and large commercial trucks.
But Gov. Ned Lamont’s campaign responded that the plan would take nearly $500 million out of state reserves and weaken the government’s preparedness to weather the next economic downturn.
“Connecticut is ranked at the bottom of the states for doing business,” Stefanowski said. “CNBC just gave Connecticut’s economy an F. Small business owners are struggling with runaway inflation. … The governor is completely out of touch with people’s pain.
The Madison businessman noted that Connecticut just closed the 2021-22 fiscal year on June 30 with an unprecedented surplus of $4.3 billion – equal to one-fifth of the entire general fund of the last budget.
Lamont and the legislature agreed to devote the bulk of that budget cushion, $4.1 billion, to reducing the state’s massive long-term pension debt — a $40 billion problem created by decades low savings between the late 1930s and 2010. The remaining $200 million would be used to increase the state’s emergency budget reserve from $3.1 billion to $3.3 billion, keeping it 15% of the new year’s general fund – the maximum allowed by law.
But Stefanowski said businesses, small businesses in particular, needed help now.
The largest component of his relief plan involves depositing $400 million of Connecticut’s budget reserves into the state’s unemployment trust.
This program has borrowed nearly $1 billion from the federal government to help cover unemployment benefits since the coronavirus pandemic first hit Connecticut in March 2020. More than 290,000 people have received weekly benefits during the worst of the outbreak in spring and early summer 2020.
Connecticut has paid off much of that debt but still owes nearly $200 million. But even after that’s covered, the state fund needs an additional $1.4 billion to meet the federal unemployment trust solvency standard. This represents the estimated cost of one year of unemployment benefits. Because Connecticut hasn’t met this standard for years, it can’t borrow without interest when its fund runs out.
Companies are assessed to replenish the unemployment fund, including covering its debts and helping to raise the balance towards the solvency threshold.
The Connecticut Business and Industry Association has repeatedly called for a portion of the state government’s fiscal windfall to be dedicated to boosting confidence and avoiding higher business valuations in coming years.
Besides the single deposit in the unemployment trust, Stefanowski also proposed four ongoing tax cuts to help businesses:
• Repeal of new highway user fees for most large commercial trucks effective January 1st. These fees, which would not apply to dairy vehicles, are expected to generate approximately $90 million per year.
• Repeal of the 1% sales tax surtax on restaurant food and other prepared meals that Lamont and lawmakers approved in 2019. This costs consumers approximately $65 million per year.
• Restore research and development tax credits to pre-2019 levels, saving businesses approximately $28 million per year.
• And reverse a 2019 hike in the state tax on sole proprietorships, LLCs, and certain other small businesses. It would cost Connecticut about $53 million a year.
Stefanowski also renewed Tuesday his challenge to Lamont and the legislator to suspend the diesel fuel tax for the remainder of the calendar year. It would cost the state about $60 million. The diesel tax per gallon increased on July 1 from 40.1 cents to 49.2 cents.
Lamont’s campaign spokesman Jake Lewis noted that Stefanowski did not explain in his plan how he would pay for the ongoing aid.
“Bob’s plan not only lacks detail but, like most things Bob sells, it also lacks honesty,” Lewis said. “Under Governor Lamont, we have seen 18 straight months of job growth, thousands of new businesses registered in record numbers, and the largest tax cuts for working families in state history. “
Lamont and the Democratic majority in the legislature approved a $660 million tax relief package earlier this year. But while Democrats note it’s one of the largest in state history, Stefanowski and other Republicans counter that it was far too small, given a rate of national inflation that has reached a 40-year high.
“Now that Governor Lamont has put Connecticut on a strong and sustainable fiscal path,” Lewis added, “Bob Stefanowski seems determined to return our economy to the endless cycle of budget deficits and tax malfeasance.”
Stefanowski responded that his plan would boost job growth and the state’s economy.
“Based on Governor Lamont’s failure to support small businesses and the 739,000 people they employ, it doesn’t surprise me that he’s unhappy that my plan begins by cutting the millions of dollars in taxes that ‘He lifted and hurt Connecticut’s economy and entrepreneurs,’ Stefanowski said. Every tax dollar you give back to a small business owner is reinvested right here and will help grow a strong and healthy local economy.