As Connecticut state and business leaders continue to look for ways to work together and create a more business-friendly environment that encourages growth and innovation, the cost of doing business is one area which continually requires focus and attention. Businesses desire to be in locations where not only the right workforce and quality of life exists for its employee and management base, but also where businesses can afford to operate to their maximum level of efficiency.
With that in mind, a recent study by the Boston Federal Reserve places Connecticut in a challenging position in terms of the level of its corporate income tax rate; while 44 out of 50 states impose a corporate income tax on its businesses, Connecticut is one of only four states with a baseline corporate income tax rate of 9% or higher. This not only puts Connecticut at a competitive disadvantage with other parts of the country, but it contributes to the New England region having, on average, the highest such tax rate in the nation.
This is most certainly an issue for companies considering Connecticut as a destination to do business, and it is also an issue for those existing companies within Connecticut (and New England) who are looking to remain here and possibly grow.
Connecticut faces additional issues, according to the same report, in terms of housing prices and rate of unemployment. While the New England region’s unemployment rate in 2016 was roughly one percentage point lower than the national average at 3.6 percent, Connecticut’s was more than a point higher than the region’s at 4.7 percent, the second highest rate of unemployment of the six New England states. And the state also lags behind considerably in terms of home prices, showing the lowest home price growth in New England at 1.1 percent and lagging well behind the national average of 5.6 percent.
What does this all mean for the future of living in and doing business in Connecticut? First and foremost it means the state’s political leaders and decision-makers need to be aware of these numbers and these challenges as they shape business policy for the coming year. Connecticut has plenty of positive attributes that make it very attractive to people, most notably its excellent schools, livable communities and a highly educated workforce. But if it is going to compete both regionally and nationally for business development-and this competition between states to attract and retain businesses does take place every day-it will need to build more of a partnership between state lawmakers and private sector job-creators.
This should be viewed as an opportunity for Connecticut, a state which for decades served as a national leader in manufacturing and innovation. We were successful in the past by finding the right balance between sound public policy and good economic policy, and we can be there again. We can restore our competitiveness once more by recognizing these numbers, recognizing the challenges ahead and working as a team to make the necessary adjustments.
Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statues, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.