The Connecticut Office of Policy and Management is searching for a vendor who could analyze and model a complicated new taxation strategy that would replace part of the income tax with a payroll tax. If implemented, the new tax structure could result in employees seeing a pay reduction of 5 ...
Connecticut Department of Labor pushes new tax as road to job growth
The Connecticut Department of Labor has been passing around hand-outs to lawmakers touting a new administrative tax meant to fund DOL’s staffing costs as a way to grow Connecticut’s economy.
The DOL proposed a small business tax earlier in the year as a way to fund the department’s staffing needs with an additional $9 million. Even though the DOL has fewer staff than previous years, their costs keep rising due to fringe benefits and less federal funding.
The two-page handout claims that an Unemployment Insurance administrative tax would help pay for workforce development and training, citing job growth in the aerospace industry for states with a UI administrative tax. “There is a strong correlation between those states that employ a UI administrative tax, in part for employment services and higher than average growth in those states.”
The handout claims that states with the administrative tax have seen 9.1 percent higher job growth and implies that maintaining adequate staffing levels at DOL will help fill Connecticut manufacturing jobs with training and placement for people who are unemployed.
In an email, the DOL says the department employees affected by the tax provide “employment services that include job search assistance and training to unemployed individuals or those looking for a better job, and unemployment services that include providing benefits to those looking for a new job and prevention of UI fraud.”
DOL says that without the new tax their ability to provide these services would be curtailed and “our integrity efforts would end.”
But Peter Goia, Vice-President and Economist for the Connecticut Business and Industry Association, says the DOL’s facts and argument “ultimately mean nothing because their basic premise is wrong.”
“The reality is, DOL does not fill those kind of jobs with their typical unemployment applicant,” Goia said. “The kind of people these companies need are not the kind of people DOL gets.”
Jobs in the aerospace industry — and manufacturing in general — often require specific skill sets and training.
Goia pointed out that Connecticut Department of Economic and Community Development already has programs to train and place skilled workers in manufacturing jobs and “they spend a lot more than $9 million to do it.”
CBIA has said for several years that Connecticut’s manufacturers have more job openings than qualified job applicants. In response, companies like Electric Boat, which manufactures submarines for the United States Navy, created a job-training pipeline to fill up to 14,000 jobs over the next decade.
The pipeline is managed by the Eastern Connecticut Workforce Development Board in collaboration with the U.S. Department of Labor, the Connecticut DOL, the DECD and the state’s technical high schools.
Additionally, this week, Gov. Dannel Malloy announced Connecticut would give Electric Boat $83 million in taxpayer funded loans, grants and training assistance.
Goia says that 9.1 percent increased job growth for states with a UI administrative tax has little basis in reality when it comes to job growth in those states.
“States like Florida have war chests for specific and significant job training,” Goia said.
Connecticut’s job growth has been anemic compared to other states whether or not they have a UI administrative tax.
Connecticut’s private sector job growth was only .8 percent since last year, according to DOL’s latest numbers. Connecticut has only recovered 78 percent of the jobs lost during the 2008 recession, meanwhile, neighboring states like Massachusetts have recovered over 300 percent of the jobs lost in 2008.
But some businesses and business associations like CBIA believe that part of Connecticut’s economic growth problem may be that Connecticut’s people and businesses are overtaxed and overburdened by regulations — some of which fall under the purview of DOL.
CBIA’s annual survey of business owners found that 68 percent of respondents said additional costs of state government regulations were negatively affecting their ability to grow, while 55 percent of business owners said it was a lack of skilled applicants.
The DOL’s administration of unemployment insurance and unemployment claims has been a sore spot for business owners in the past, who say the program is unfairly stacked against them.
When Torrington-based manufacturer Borgeson Universal left Connecticut for South Carolina they specifically cited the DOL awarding unemployment insurance to an employee fired for threatening a supervisor with physical harm.
In an op-ed for the Journal Inquirer, Borgeson Universal owners Alan and Gerald Zordan said their treatment by the DOL was “the final straw,” in their decision to leave.
So it may come as little surprise that business owners oppose a tax — any tax, no matter how small — to fund a state department they feel is increasing their regulatory burden.
“If they need $9 million they should go through the budget process like everyone else,” Goia said, “or else look at their own budget.”
This article was updated with comments from the Department of Labor
“Raising taxes in response to this economic downturn ignores twelve years of Connecticut’s economic and fiscal history – and will only chop any chance of recovery off at the knees. Connecticut now has an opportunity to gain wealthy residents fleeing New York City and thereby increase its high-income tax base. ...