CT Gov. Lamont Seeks Small Business Tax Cut Paid Mostly by People Making More Than $500,000 a Year – Hartford Courant

HARTFORD – As the state’s budget surplus continues, Gov. Ned Lamont on Wednesday called for a high-priority tax cut that would benefit more than 100,000 small businesses.

Standing in a kitchen cabinet shop in Hartford’s North End, Lamont said he’s trying to jump-start a big part of the economy that creates jobs.

“Small businesses — they’re the drivers of economic growth,” Lamont told reporters. “It is an engine of economic opportunity. In past years, we spent a lot of time burdening ourselves with the biggest jobs. This is also very important, but all jobs are created by companies like Express Kitchens. That’s our Northerner.”

Lamont’s plan calls for restoring Connecticut’s pass-through entity tax credit, which would allow small business owners to get a larger credit on their personal tax returns — saving money. The total savings would be $60 million per year for 123,000 businesses.

A relatively new tax was created in 2018 and has become an engine that helps create budget surpluses. The tax is now Connecticut’s third-largest tax generator with a projected $2 billion for the current fiscal year — behind only the state income tax at $11.8 billion and the state sales tax at $5 billion.

While small retail stores and struggling businesses operate under limited liability companies that qualify for the pass-through entity tax, the lion’s share of the money is paid by wealthy small business owners. Government statistics show that more than 80% of taxes are paid by people who earn more than $500,000 a year. In addition, according to state records, nearly half of the businesses that filed under that category owed no taxes at all.

Tax cuts are one of the top priorities for the Connecticut Business and Industry Association, the state’s largest business lobbying group.

Chris DiPentima, president and CEO of CBIA, said, “This is really important, not only for our membership, but really for the Connecticut business community and economy.”

Lamont’s tax commissioner, Mark Boughton, said, “Every small business that uses an LLC in this state is going to be thrilled.”

The tax was introduced in an attempt to help individuals affected by President Donald Trump’s new $10,000 cap on state and local taxes enacted in 2017. Under that law, they could deduct a maximum of $10,000 for items such as property taxes.

But the pass-through entity tax is a “workaround” that allows for higher deductions.

“Small businesses, LLCs, sub-S, those are the types that are affected when the federal government, in its wisdom, limited the deductions for SALT, which is a state and local tax,” Lamont told reporters.

In addition to business, Lamont will also offer a middle-class state income tax cut for families making as little as $150,000 to $200,000 a year. Further details will be revealed during his annual budget address on February 8 at the Capitol.

Consensus income estimates released this week show that incomes are still strong and that last year’s surpluses are continuing.

“The era of perpetual fiscal crisis in Connecticut is over, but we cannot forget the steps that helped us get to this point today,” Lamont said. “This revenue forecast will allow me to present a budget with sustainable tax cuts for the middle class, pay down the legacy pension debt, support education, child care programs, workforce development, new housing, basic social services and public safety programs, as well as preserve fiscal guardrails that have been so critical to our recent fiscal stability.”

But Lamont’s budget director, Jeffrey Beckham, said the state must remain cautious in spending.

“We are closely monitoring global, national and state economic forces that could positively or negatively impact the final state budget,” Beckham said. “Now is not the time for new unsustainable spending, but for the continuation of sound fiscal management.”

The Connecticut chapter of the National Federation of Independent Business, which represents small businesses, welcomed the proposal.

“Small business owners here in Connecticut are pleased to hear that the governor is taking action to help them stay in business during this tough economic climate,” said Andy Markowski, the group’s state director. “As small business owners face supply chain issues, inflation and skilled worker recruitment issues, restoring the full value of the pass-through entity tax credit is an important step that signals Connecticut’s values ​​and desire to keep its job creators in business.’ ‘

Christopher Keating can be reached at [email protected]

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