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Conn. businesses pan renewed taxes in budget

Stephen Singer, AP Business Writer

HARTFORD, Conn. (AP) -- Gov. Dannel P. Malloy's proposed two-year $43.8 billion Connecticut budget got mixed reviews Wednesday from businesses over taxes that would be extended despite what they believed were promises to end them.

The budget Malloy sent to the legislature continues taxes on electric generation and a corporate surcharge that were enacted in 2011. Businesses say Malloy and fellow Democrats who control the legislature promised to end the taxes this year.

Kevin Hennessy, spokesman for Dominion Resources Inc., parent of Millstone Power Station in Waterford, said the company agreed to the electric generation tax believing it would last just two years. Dominion will lobby hard to strip it out of the budget, he said.

"I don't think we'll be fooled again," he said. "We'll regroup. This is Day One."

The tax, which is based on kilowatt hours of power generated by a plant, costs Dominion $42 million a year, Hennessy said. That's more than half the $70 million in state revenue the tax generates annually.

The corporation tax, which is expected to generate about $721 million in revenue, includes a 20 percent surcharge.

John Rathgeber, president of the Connecticut Business & Industry Association, the state's largest business group, said state officials are making it harder for companies to do business in Connecticut.

"If you want businesses to have confidence to invest in your state, you have to keep your promises that things going to take effect will take effect," he said.

Rathgeber said the governor and legislators must cut more state spending rather than seek new sources of revenue.

Malloy's budget director, Benjamin Barnes, said the administration broke no promises. It pledged to keep the corporate surcharge and generation taxes in place for two years, but did not say it will abolish them at the start of the state's new two-year budget cycle on July 1, he said.

Keeping the taxes in place is a "reasonable measure" compared with alternatives such as raising taxes or cutting services, he said.

Unlike his previous two-year budget in 2011, which raised taxes by $2.6 billion over two years, Malloy said this latest plan includes no new tax increases.

Rep. Sean Williams, ranking Republican on the Finance Revenue and Bonding Committee, said extending the taxes is tantamount to an increase.

"I would urge you or anybody else to talk to any business owner who has to pay those taxes and I think they would call them tax increases because they plan their investment strategy under what Connecticut tax laws were at the time," he said.

Andrew Markowski, state director for the National Federation of Independent Business, praised Malloy for not raising taxes and proposing to exempt the first $20,000 of the assessed value of vehicles from local property taxes, which Markowski said will benefit small businesses.

"By not including more tax increases the governor acknowledged that Connecticut's budget troubles are not tied to revenue," he said.

But he criticized the governor for not ending the tax on electric generation, which he said will leave in place a costly burden to small businesses.

A top Senate Democrat, Majority Leader Martin Looney, said the decision by the Malloy administration and lawmakers to extend or end taxes depends on economic and fiscal conditions.

"Everything has to be reconfigured based on new realities," he said.