Hartford Fiddles While Small Business Optimism Burns
CONTACT: Andy Markowski, 203-626-5815 or Jason Brewer, 202-406-4435
Senate fails to deliver on repeal of Business Entity Tax as economic optimism among small employers plummets to a 25-year low
HARTFORD, Conn. -- Despite alarming evidence from small employers that the nation's economy is heading directly toward a recession, the Senate stymied efforts to repeal the business entity tax -- a tax dubbed temporary when created in 2002 -- which hits Connecticut small employers disproportionally hard. The most recent National Federation of Independent Business Small Business Economic Trends survey released this week shows that the NFIB Index of Small Business Optimism fell 3.3 points in March to 89.6 -- its lowest reading since the monthly surveys were started in 1986, and the lowest quarterly reading since the second quarter of 1980.
"With fresh data on a national level, coupled with last week's report of a dramatic plunge in Connecticut's new business startups, there is overwhelming evidence that small employers are feeling the effects of a recession," said NFIB/Connecticut State Director Andy Markowski. "Last night, the Senate had a chance to act on legislation which would provide an immediate stimulus to our state's small job creators by eliminating the BET -- and they failed.
The vote fell along party lines with 12 Republicans supporting repeal, and 22 Democrats voting to keep the tax. One Republican was absent, while one Democrat failed to vote. Markowski was puzzled as to why several senators voted in favor of repeal in committee, but then switched their vote once the bill came before then full Senate.
"That was a stab in the back for small businesses that are struggling," Markowski said. "To pull a bait and switch like that when so many small employers are trying desperately to survive sends a terrible signal from Hartford to the small business community."
Several senators pointed to a possible state budget shortage as reasoning for voting against repeal of the BET.
"I would argue that the budgets of Connecticut's 76,000 small businesses and their 774,000 employees are more important to the long-term health of our state economy than a minor hit to the state budget," Markowski said. "Senators who voted against repeal of the BET have sided with bureaucracy over jobs."
Other senators said it would be unfair to repeal the BET on large companies and law firms that are profitable. Markowski called that argument a red herring.
"The bottom line is that 90 percent of the businesses who pay this tax are small businesses," Markowski explained. "Class warfare doesn't work in this debate; because the vast majority of this tax is collected from the pockets of our state's smallest employers who can least afford it.
With small businesses struggling with rising food prices, skyrocketing energy bills and soaring healthcare costs, Markowski urged senators to reconsider the vote quickly, and urged Gov. M. Jodi Rell to continue to push for full repeal in the budget negotiations.
"Given the recession clouds looming on the horizon, now is the time to act to give small employers badly needed relief," Markowski said. "We hope the Senate will follow the governor's lead and fully repeal this costly and onerous tax before some of our small businesses end up closing their doors for good."