Good news on the horizon for business owners in Connecticut it seems!
I’ve read numerous places that the best way to become wealthy is to own your own business.
Well, I’ve done that, and while I have earned a lot of additional income over the years, there have always been drawbacks. In Connecticut, the biggest drawback has been the “Business Entity Tax”.
Back in March of 2003, out of the blue, right in the midst of tax season, I received a bill from the Secretary of State for $250 for a Business Entity Tax.
At first I had no idea what this was all about. I’d been in business for six years at that point and had never had to pay the state a dime since incorporating.
I sucked it up and paid it thinking it’d be a one-shot deal and chalked it up as one of those losses you have to classify as a “cost of doing business”.
In 2004, I got the bill again. That’s when I did some research and learned that it was a tax for the sake of a tax. Huge companies in the state like Aetna, Northeast Utilities, ESPN, and even the WWE have to pay the state $250 just for, well, existing.
But so do little guys like me – where, on occasion, $250 is more than we bring in any given month. Chump change for the big guys, but a huge expense for super small business.
One of those great examples where the little guy gets screwed by a flat tax.
With March fast approaching, I’ve budgeted out the expense for 2008, but the news today indicates that I may just be able to hold on to that income this year.
Lawmakers Seek To End Business Entity Tax
By JANICE PODSADA | The Hartford Courant
3:49 PM EST, January 17, 2008
The secretary of the state and a bipartisan group of state legislators said Thursday they will seek to abolish Connecticut’s annual $250 business entity tax during this year’s legislative session, which begins Feb. 6.
“This is an onerous tax. It’s really just a tax for existing,” Secretary of the State Susan Bysiewicz said. The tax was created six years ago as a stopgap measure to balance the state budget, she said.
“In 2002, we had a $96 million deficit. For the past four years we’ve had surpluses,” she said. “Before we get too used to this tax, let’s get rid of it.”
More than 118,000 businesses pay the annual business entity tax, which brings the state about $30 million a year. The amount represents about one-sixth of 1 percent of the state’s annual $18 billion budget. Bysiewicz said making up the $30 million difference should be relatively easy.
Republican policy makers attempted to abolish the tax last year, including the proposal as part of a budget amendment package. But it was defeated.
This year, abolishing the tax will be in a separate bill, which should increase the odds of its passage, both Democratic and Republican legislators said.
Small businesses, which create many new jobs, are unfairly burdened by the tax, said Bonnie Stewart, vice president of government affairs with the Connecticut Business & Industry Association.
Business registration fees are relatively low in Connecticut. For example, it costs $60 to register a limited liability company or limited liability partnership in the state. Corporations pay more. But at the end of the year businesses, regardless of size, must pay the $250 tax whether or not they made money or even launched their enterprise.
“I hear from many people who say they formed a company, but didn’t pursue it. And then they get this bill in the mail,” Bysiewicz said.
“While $250 may not seem like a lot, for our members, all of whom are small businesses, it can mean a month’s electricity bill or a month’s insurance,” Frank Alvarado, director of the New Haven and Willimantic offices of the Spanish American Merchants Association said.
“When we get that bill, it’s the one time we think about doing business in another state,” Theodore C. Hsu, owner of Horizon Services Co., a cleaning and supply business in East Hartford, told participants. “I talk to many other business owners, and they see this as being gouged. It stops their spirit.”