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Connecticut lawmakers earlier this year passed a budget with more than $1 billion in new revenue, including increased corporate taxes, to plug a budget gap and ensure the state has resources to make needed investments in education, transportation and health care. In late June, Gov. Dannel Mallow called lawmakers back to the capital for a special session, essentially caving to notorious tax dodger General Electric (GE) and other corporations’ demand that the state pare back just enacted tax chages. The most significant change enacted in the special session was a delay in the start date for combined reporting. Combined reporting requires a multi-state corporation to add together the profits of all of its subsidiaries, regardless of their location, into one report for tax purposes. Connecticut Voices for Children puts it this way:
“Combined reporting is an essential policy aimed at preventing corporations from using accounting gimmicks to shift profits actually earned within their borders to states and foreign countries where they will be taxed at lower rates or not at all.”
This week, the governor and legislature once again put GE’s interests over the health and well-being of the state’s residents. Due to underperforming personal income tax collections, the state faces a projected $350 million budget shortfall for the current fiscal year and another $552 million in the next fiscal year. To close the current year gap, the legislature voted this week to cut early-childhood programs, conservation efforts, and medical services for inmates. But, it also agreed to spend money to cut corporate taxes including modifying combined reporting requirements and changing how some corporate deductions can be claimed.
The new corporate tax changes are largely seen as an effort to keep GE headquartered in the state. But not surprisingly GE hasn’t committed to staying put and news leaked this week they may be considering a move to Boston. Since Massachusetts also requires multinational corporations to file combined returns, this latest news would suggest that Connecticut is being played by GE executives.