Monthly Archives: June 2013

Coming This Fall: State Tax Amnesty For Two Months, With a Twist

by Categorized: law, Politics, Public finance Date:

Buried in the state budget that takes effect Monday is a tax amnesty program that will give delinquent personal and business taxpayers a 2-month window to lower their interest payments and avoid prosecution.

If you owe a tax dating back to last November or earlier, you can come forward and pay up between Sept. 16 and Nov. 15, with 3 percent interest — not the usual 12 percent.

The state tax amnesty was a little-discussed part of Gov. Dannel P. Malloy’s budget plan from the start and it will pull an estimated $35 million out of the woodwork in the 2013-14 fiscal year.  It will cost an estimated $7 million in the following year, money the state figures it would have collected eventually.

Obviously that’s a good tradeoff in a tough budget year. The last time the state offered an amnesty window was 2009, and before that it was 2002 and 1995, according to Charles Lenore, a tax partner in the Day Pitney law firm’s Hartford office.

But this year, apparently for the first time, there’s a stick along with the carrot.  Any taxpayer who  neglected to file in the past and is eligible for the amnesty but fails to come forward during this year’s window will owe an extra 25 percent penalty.

That hefty penalty, which is designed to smoke out more delinquent taxpayers, raises concerns, said Lenore, who generally believes the amnesty is a good move this year.

“It worries me because there can be legitimate differences of opinion as to whether or not you’re supposed to file,” Lenore said. “There’s lots of times when things are gray.”

It’s almost always clear for personal taxpayers. But, for example, a business in another state may or may not have to file in Connecticut depending on whether its operations here form a “nexus,” which basically is a presence in the state.  How many visits by a sales team amount to a nexus?  Not always clear, Lenore said.

Who will likely use the amnesty? It’s not, for the most part, taxpayers who simply shirked their responsibilities. Many are in disputes with the state Department of Revenue Services, part of the usual run of business.

“It runs the complete gamut from small companies that haven’t paid, can’t pay or are late in paying, to companies that are larger that may have audit issues,” Lenore said.

The state’s sales tax, for example, “is so complex, it’s almost impossible to get it right,” he said

The amnesty creates some immediate tension. If a company is now being audited or thinks it might have a dispute, should it pay up at the lower interest rate and eliminate further risk, or take a chance and wait? Everyone in the audit hopper will want the department to finish up before the amnesty window ends.

Most business and personal taxes are part of the amnesty, including the most violated tax law of them all: Failure to pay a use tax, typically 6.35 percent, for goods bought in other states and shipped here. So if you had B&H ship $6,000 worth of video equipment in early 2012 and you didn’t declare and pay that $381 tax on this year’s return, you have another chance to come clean this fall.

Not eligible are taxpayers in a criminal case as of July 1; those who already signed a payment agreement with the department or reached a compromise agreement; and those who are in a “managed agreement” with a deal to have the department oversee a self-audit.

Like other budget tricks, the amnesty is a way of raising a few million more dollars without raising tax rates. It only works if it’s done rarely, of course, since an annual amnesty would just mean a lower interest rate on late bills.

And as the estimated revenue figures show, it’s not all money that the state would have eventually collected.

“Does it bring in money that the state doesn’t know about? It almost certainly does,” Lenore said. “Out-of-state businesses may use it as an opportunity to come forward and start filing.”

For the state, he said, “getting some cents on the dollar today is probably better than waiting some number of years to see whether you collect.”

How The Court Rulings On Gay Rights Help Connecticut

by Categorized: Economy, law Date:

The pair of rulings Wednesday morning on the Defense of Marriage Act and California’s Proposition 8 represent a double victory for Connecticut’s economy even though they fall short of delivering the right-to-marry order that many had hoped to see.

In fact, the rulings help Connecticut precisely because they don’t confer same-sex marriage rights across the land. In striking down the DOMA, the narrow, 5-4 majority said the federal government cannot take away a legal standing that states choose to allow.

Excerpt of the opinion from SCOTUS Blog:

 The federal statute…for no legitimate purpose overcomes the purpose and effect to disparage and injure those whom the State, by its marriage laws, sought to protect in personhood and dignity.

That means states such as Texas and South Dakota, whose governors traveled to Connecticut last week to poach our businesses, are still free to deny same-sex rights. And that gives business owners who live in Connecticut one more factor to think about as they weigh staying or leaving.

Do they want themselves and their employees to live in a place that restricts civil rights? And even if they don’t care about gay rights or if they oppose same-sex marriage, they will have to consider that many potential employees won’t move to states that are less progressive.

And the decision is a double victory because it says that for those states that do confer marriage rights, the federal government can’t take those rights away. That means Social Security and other benefits, and it means there will be a rush at the stroke of midnight on Year’s Eve for married couples of the same sex to become the first to file federal income taxes jointly.

This is the legal opposite of Roe v. Wade, in which the Supreme Court in 1973 said no state may deny reasonable rights to abortion. As we saw in Texas Tuesday night, states are still debating what abortion rights are reasonable 40 years later, but the point is, the court has denied states a lot of leeway in setting abortion rules.

So, yes, an overturning of Roe v. Wade would also help Connecticut, as it would let states decide whether to confer abortion rights, and we all know what places such as Texas and South Dakota would do.

“From a narrow perspective of what helps Connecticut, this ruling is what helps Connecticut,” said UConn economist Fred V. Carstensen. He added that because big companies already bless same-sex unions in their employment policies, “in the short run, it may make the 12 states that are hospitalble to gay marriage more attractive to Fortune 500 companies.”

This is just one of many factors businesses must weigh, and not the biggest one by a long shot. So we’re not going to see a flood of people and companies into the gay-marriage states. But Carstensen said, in a comment that flies in the face of what we’re seeing these days, “The states that are more progressive…are going to be the winners.”

I first heard the economic argument about Roe v. Wade  from Lewis Mandell, an economist and associate dean at the UConn business school who left in the mid-90s. It sounded at first like a crackpot theory or a joke, but it isn’t.  Consider that much of the industrial move to the low-cost South in the ’60s and 70s coincided with the Voting Rights Act and the Civil rights Act, backed up by a series of crucial rulings by the Warren Court.

And if you think recruitment of progressive-minded people doesn’t matter to businesses, think again. We would not be here today talking about federal gay marriage rights if it weren’t for those Fortune 500 companies, which offered health benefits to same-sex couples in the ’90s as part of their desperate search for top-flight, educated workers — long before the first state blessed the first gay marriage.

Now the baby boomers are hitting age 65 at the rate of 10,000 a day, and soon the United States will again be a place where employees can call their own shots — maybe even in slow-growth states like Connecticut.

If those Gen-Xers and Gen-Yers can see a big difference between states, they might just choose to avoid what many perceive as backward places. And gays and lesbians tend to have more education and income than the population as a whole, according to some research.

As it happens, many of the states that are lowest-cost for companies, the red states, will be the ones that restrict abortion rights, deny same-sex marriage, sanction school prayer and a religious curriculum, ban stem-cell research, keep the death penalty and shun gun control.  Personally, I oppose Connecticut’s new ban on semiautomatic rifles that have a pistol grip, but in general I and many other people would not choose to live in a state that had a conservative social agenda.

The California ruling in the Proposition 8 case adds to the state’s rights canon, by remanding the decision back to California rather than striking down the ban on same-sex marriage outright. It isn’t every day that Justice Kagan joins with Justice Scalia.

From SCOTUS Blog:

Here’s a Plain English take on Hollingsworth v. Perry, the challenge to the constitutionality of California’s Proposition 8, which bans same-sex marriage: After the two same-sex couples filed their challenge to Proposition 8 in federal court in California, the California government officials who would normally have defended the law in court, declined to do so. So the proponents of Proposition 8 stepped in to defend the law, and the California Supreme Court (in response to a request by the lower court) ruled that they could do so under state law. But today the Supreme Court held that the proponents do not have the legal right to defend the law in court. As a result, it held, the decision by the U.S. Court of Appeals for the Ninth Circuit, the intermediate appellate court, has no legal force, and it sent the case back to that court with instructions for it to dismiss the case.

Wednesday’s Supreme court ruling confirmed that states have a right to set a social agenda, and that’s part of the reason Connecticut should celebrate. “This puts another arrow in our quiver,” Carstensen said.

Put another way, we need all the help we can get.

 

 

 

 

 

 

 

 

State Holding Its Own On Corporate Welfare, ‘Megadeals’ Report Shows

by Categorized: Jobs Date:

When it comes to the biggest corporate welfare deals, Connecticut is holding its own among states — for better or worse — with six incentive packages worth $75 million or more over the last two decades.

Pound for pound, under Democrats as well as Republicans and a third party, Connecticut is right up there with Michigan (29 deals) and New York (23 deals, a record $11 billion). The state-by-state listing is part of a report (PDF) from the advocacy group Good Jobs First, titled “Megadeals.”

Distribution of Megadeals by State from the Good Job 'Megadeals' report.

Distribution of Megadeals by State from the Good Job ‘Megadeals’ report.

The Washington, D.C.-based group argues that the deals are rarely if ever worth their cost, and that the average total cost per job in these giant packages is $456,000. That’s a huge number considering that typical, smaller corporate incentives run in the range of $40,000 per job.

Connecticut’s biggest deals were $150 million in 1994 to Swiss Bank, now UBS, in Stamford, under former Gov. Lowell P. Weicker Jr.; and $115 million last year for Bridgewater Associates, the giant hedge fund, to move its headquarters. The Swiss Bank deal is generally viewed favorably, as it sparked a new wave of financial services gains in Stamford, leading to such other deals as $100 million for Royal Bank of Scotland, in 2005, under former Gov. M. Jodi Rell. It’s been costly but worth the huge investment.

The Bridgewater deal, under Gov. Dannel P. Malloy, is a head-scratcher, since the head of Bridgewater alone made somewhere in the neighborhood of $4 billion in the prior year. That’s personal income, folks.

But could Malloy risk Bridgewater moving to another state? Nope. That’s the problem with these megadeals, and with corporate welfare in general. These companies have taxpayers over a barrel. We never know whether the moves they don’t make, and the jobs they add, would have happened if we didn’t offer greenmail.

And so we pay up. The Good Jobs First Report is the best scorecard I’ve seen, from the group that has been bird-dogging this issue from the start.

A ‘Civil’ Meeting Between Governors Perry And Malloy

by Categorized: Jobs Date:

The word to describe Texas Gov. Rick Perry’s visit to Connecticut Monday is civility.

By all accounts, in Perry’s meetings with firearms manufacturers and others, he offered few if any details about what Texas might give them. On the same day, South Dakota Gov. Dennis Daugaard was in town on a much lower-key visit to meet with many of the same people.

Texas Gov. Rick Perry is greeted by Connecticut Gov. Dannel P. Malloy in this photo, tweeted by Malloy's Communications Director, Andrew Doba.

Texas Gov. Rick Perry is greeted by Connecticut Gov. Dannel P. Malloy at Max Downtown. (From Twitter: Andrew Doba, Malloy’s Communications Director)

At Max Downtown, where Perry had meetings and hosted a reception, he was surprised by a visit from Gov. Dannel P. Malloy.

“I wanted to welcome him to our state,” Malloy said. “We wanted to show him what good Yankee hospitality is all about.”

“I hope I’ve been civil,” Perry said. “To make the effort is a great show of hospitality.”

Both Malloy and Perry referred to the handshake as just a bit of civility among fierce competitors.

“I hope we can shake hands, realize that we’re just competitors,” said Perry.

The Texas reforms that make that state among the friendliest for business go back more than a decade. “You’re going to be most comfortable in a place where you get to keep more of what you work for,” Perry said.

When I asked about if those reforms — in some cases a loosening of regulations — also contribute to situations like the fertilizer plant explosion in West, Texas: “Until we get to the bottom of that investigation, I think it’s a bit premature.”

On a tour of Colt’s Manufacturing earlier in the day, Perry shot a half dozen pistols and rifles for about 15 minutes.

“He’s a good shot and he knows how to handle firearms,” said Bill Taggert, the Colt executive charged with gathering information from various states about economic development. “He knew our products.”

Since Connecticut officials started considering a ban, Colt’s has said it would look at all of its options. On Monday, Taggert said, those options include picking up and moving the entire company to another state.  Other actions could also include expansion elsewhere, staying where they are, or moving to a different location in Connecticut.

Asked whether Colt’s search is more than the usual business practice, Taggert said, “I do think that the actions by the legislature put a little spark into it.”

Taggert and other gun manufacturers have said repeatedly that just feeling welcome and wanted by a governor is a strong incentive.

I asked him if he feels wanted by Malloy, who has said that manufacturers should have no reason to leave despite the ban on some semi-automatic weapons.

Taggert’s response: stone silence.

Daugaard said he did not see Malloy Monday either, adding “I’m not here to see him.”

Lacking any metropolitan area, South Dakota has a tougher challenge attracting people and companies from Connecticut.

“South Dakota is a very good environment for manufacturers, Daugaard said. “As the national manufacturing base has declined over the last few years, South Dakota’s has grown. Our worker productivity is very high.”

While Perry stuck to niceties, Daugaard had some criticism for Connecticut. “I think they over promised and underfunded their pension fund.” Instead, adding that South Dakota has no debt.

South Dakota Gov. Dennis Daugaard arrives at Stag Arms in New Britain. (Wes Duplantier)

There is a cluster of gun manufacturers in South Dakota, near the Black Hills and Dauggard said his state was the first in the nation to protect gun manufacturers from law suits by consumers.

As for the state’s lack of any metro area, he said. “It depends upon what people are interested in finding. I personally rather would not live in a metro area.”

And what about the $1 million advertising campaign Texas launched to lure jobs from the northeast?

Comparing South Dakota to Texas, he said, the states are traditionally one and two for being business-friendly, but the South Dakota governor took a shot at Texas: “Texas is a big sate with more money than South Dakota and it can afford to spend money that may or may not be effective.”

Later today, Perry will give remarks at the Civility in America Speaker Series at Ferguson Library in Stamford, where the Texas governor will also take questions from the public.

A Law And A Cause Hit The Airwaves As Obamacare Marketing Begins

by Categorized: Health Care, Jobs, marketing, Public finance Date:

Nearly 10 percent of the state’s residents have no health insurance, and Kevin Counihan and Jason Madrak have a good picture of who they are and even where they live.

But for Counihan, CEO of the state health exchange that will start selling Obamacare  coverage on Oct. 1, and Madrak, the marketing chief, knowing details about the nearly 350,000 uninsured people is one thing. Persuading them to enroll in a health plan is something else altogether.

On Monday, the health exchange — called Access Health CT — launches its $15 million public marketing campaign, including TV ads, to reach as many of those uninsured people as possible. The idea is to get at least 100,000 of them to enroll in a health plan for 2014.

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Smith & Wesson Profits Triple For Fiscal Year

by Categorized: Manufacturing, Wall Street Date:

Smith & Wesson Holding Corp., one of two publicly traded gunmakers, said its per-share profit for the fiscal year ended April 30 tripled to $1.22, and sales were up 43 percent to $588 million.

The Springfield-based gunmaker, along with Fairfield-based  Sturm, Ruger & Co., is considered a proxy for the entire gun industry. Sales were up in 2012 on fears that President Obama’s re-election would bring new gun controls, and the Newtown tragedy heightened that trend further.

Smith & Wesson issued the preliminary report on Thursday. The company, with $100 million in cash on hand, also said it upped its share-buyback authorization to $100 million, from $15 million, after buying back $20 million earlier this year.

Shares were up 5 percent Friday to $9.78 on the Nasdaq market.

Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC), a leader in firearm manufacturing and design, today announced preliminary net sales and earnings per share results for its fiscal 2013 fourth quarter and full year periods ended April 30, 2013.

Preliminary net sales for the fiscal fourth quarter were $179 million, an approximate increase of 38% over the comparable quarter last year. Preliminary GAAP net income from continuing operations is expected to be approximately $0.44 per diluted share compared with net income of $0.27 per diluted share from continuing operations for the comparable quarter last year.  The company ended the fiscal year with a cash balance of $100.5 million.

Preliminary net sales for fiscal 2013 year were $588 million, an approximate increase of 43% over fiscal 2012. Preliminary GAAP net income from continuing operations is expected to be approximately $1.22 per diluted share compared with net income of $0.40 per diluted share from continuing operations for the prior year.

Gunmakers In Connecticut Will Host Two Governors Next Week, Not Just One

by Categorized: Economic Development, Manufacturing, Politics Date:

Connecticut gun manufacturers will welcome not one red-state governor on Monday, but two — as Texas Gov. Rick Perry’s tour is followed by a visit from South Dakota Gov. Dennis Daugaard that afternoon and Tuesday.

Both of the Republican governors will tour the Colt companies in West Hartford and O.F. Mossberg & Sons in North Haven, and perhaps other firearms makers. While Perry announced his foray to Connecticut and New York with fanfare and an ad campaign, Daugaard planned his trip quietly.

Perry, keeping with his higher-key tone, will host a lunchtime reception for Connecticut firearms firms at Max Downtown restaurant in Hartford, in addition to touring several plants in a whirlwind day.

Both governors hail from states that offer low taxes and a business climate that’s more than friendly to the makers of military-style guns of the sort that Connecticut banned for sale on April 4.

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Pelletier, AFL-CIO Secretary-Treasurer, Is Strong Frontrunner To Succeed Olsen

by Categorized: Labor Date:

One day after AFL-CIO president John W. Olsen announced he’s stepping down after 25 years, Lori Pelletier, the No. 2 officer of the labor federation, declared that she’s running for the job.

Pelletier is the clear frontrunner, and came out with the support of the presidents of the two largest AFL-CIO unions. She has been secretary-treasurer since 1999, a job that makes her the chief lobbyist for the federation.

Delegates will elect the new president — actually it’s a combined job of president and secretary-treasurer — at the AFL-CIO convention at MGM Grand/Foxwoods Sept. 25-27.

Like Olsen, Pelletier began her career in a skilled trade; he was a plumber-pipefitter and she was a machinist at Pratt & Whitney for 13 years before joining the union administration.

Pelletier is a firm advocate for workers’ causes, like Olsen, but she sometimes takes a lower-volume approach, less an attacker and more of an explainer, especially when it involves bills that may have complex consequences.

“As someone who came up from the shop floor, I believe unions are the rising tide that lifts all boats. But we are also under attack like never before, and we must respond in new and creative ways,” Pelletier said in a release announcing her candidacy.

Sal Luciano of the 32,000-member AFSCME Council 4 and Melodie Peters of  the 28,000-member AFT Connecticut both threw their support behind Pelletier, the release said.  Both union heads referred to the challenge the union faces. It’s a battle for membership and bargaining position at a time when many anti-union forces are rising.

“I’ve known Lori an awfully long time,” Peters said, “and I can’t think of anyone better suited to lead our federation through the challenging times ahead. We need to be innovative and progressive if we’re going to fulfill the hopes and aspirations of working people in Connecticut.”

As Texas Gov. Perry Raids Connecticut, Smugness Won’t Work

by Categorized: Economic Development, Politics Date:

Governors visit businesses in other states all the time, usually in low-key meetings that aren’t publicized. But that’s not how they roll in Texas, and Gov. Rick Perry is letting everyone know he’s on his way to New York and Connecticut next week to raid companies — complete with a $1 million TV ad campaign.

Perry is shopping for firearms firms, of course, as Connecticut and New York fight each other for the right to claim the nation’s strictest gun control laws.  But he’s also targeting financial services and pharmaceuticals, industries we thought were in our wheelhouse.

Call it the “Yankee Come On Down” tour. It’s a raid Connecticut needs to take seriously.

So listen up: No sitting back in our smug way, saying Texas is a backward place devoid of culture, full of poverty and pestilence. Arrogance is slipping as a strategy of choice with each passing report on jobs and economic activity — including last week’s bombshell that Connecticut’s economy shrank in 2011 and 2012.

Perry arrives in Connecticut Sunday and will be here Monday as well, said spokesman Josh Havens, though he couldn’t say whether the Hartford area is on the agenda. To those guys, Connecticut may still be just a dot on the map, not a place with four, count ‘em, four distinct metro areas.

Perry had no public events scheduled as of Monday evening, but that might change — even if it’s just a press conference. Meetings with companies, some still being worked out, are private, though several firms in the firearms industry have made no secret that they’re looking at Texas.

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T. Boone Pickens In Hartford: CT Is Tops In Natural Gas

by Categorized: Energy, Politics Date:

Connecticut has had some low rankings in various business and economic lists lately, some silly, some serious. But on natural gas policy, energy magnate T. Boone Pickens has declared the state a winner.

T. Boone Pickens, left, with Speaker Brendan Sharkey Dan Haar/The Hartford Courant

T. Boone Pickens, left, with Speaker Brendan Sharkey
Dan Haar/The Hartford Courant

“Maybe the best in the country,” Pickens said on a visit to Connecticut last week. “The state of Connecticut is going pretty damn good, from talking to the governor.”

Pickens, who made his fortune as a corporate raider in the oil and gas industry in the 1980s, in recent years has been the nation’s leading proponent of natural gas, especially for transportation systems, and wind power. He was in town to receive an honorary degree and speak at the Goodwin College graduation, where he talked about creating personal plans and working hard — not about energy, spokesman Lee Sawyer said.

The 85-year-old billionaire had been at Goodwin to deliver a lecture in 2009, when he was in East Hartford with energy ally Rep. John B. Larson.

On Thursday, he stopped in on Gov. Dannel P. Malloy, and on House Speaker Brendan Sharkey in a year when Malloy is pushing hard for expansion of natural gas lines to broaden the fuel’s use for residences and businesses.

It was unclear what, if anything Pickens would like Connecticut to do  — he didn’t answer that question directly when I asked — but he’s also involved in the more controversial liquid natural gas, which has storage concerns.

“It’s going to work for heavy-duty trucks,” Pickens said of LNG.