Connecticut’s Business Taxes in Context: A Summary of Ernst & Young’s National Survey of State and Local Business Taxation

Back • Publication Date: May 25th, 2010

Authors: Orlando Rodriguez, M.A. & Shelley Geballe, J.D., M.P.H.

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This comparison of business taxes across the country finds that CT is a relatively low tax state for businesses. This brief summarizes the findings of a study on state and local business tax revenues for Fiscal Year 2009, which was conducted by the accounting firm of Ernst & Young for the Council on State Business Taxation.

  • Compared to other states, Connecticut’s state and local business tax revenues are a relatively small share of the state’s private sector economy. Connecticut ranked 5th lowest in total state and local business tax revenues among states when compared to the level of private sector economic activity in each state.
  • Connecticut’s increase in overall state and local business tax revenues between Fiscal Years 2005 and 2009 was the lowest growth rate among all states. The growth rate in Connecticut’s combined personal and business tax revenues was 8th lowest in the nation. Connecticut businesses paid for only one tenth of increases in state and local taxes during this period.
  • Corporate income taxes make up a small and declining share of business tax revenues in the state. Corporate income taxes accounted for only 6 cents of every dollar of combined state and local business taxes collected in Connecticut in Fiscal Year 2009. Property taxes make up a far larger share of business taxes.
  • Connecticut businesses net a positive return on taxes paid. Businesses paid 99 cents for every dollar of benefit derived from public spending that directly benefited businesses. These services include education, transportation, water and sewer infrastructure, police and fire protection, courts, and others.

CT Voices’ summary of these data concludes that while Connecticut may be a high cost state for businesses, it is not a high tax state. There are numerous components of business cost including labor costs, health care costs, property taxes, corporate taxes, and energy costs, among others. It will require a focus on items other than business taxes, which are among the lowest in the country in Connecticut, to obtain a tangible reduction in business costs in the state.