1. Bringing Job Growth to Connecticut Senate Republican Proposals April 11, 2007

2. 1 Three Key Proposals 1.Helping existing businesses create new jobs 2.Eliminating counterproductive regulations 3.Attracting new “next generation” industries to Connecticut Bringing Job Growth to Connecticut

3. 2 1) Creating New Jobs in Existing Connecticut Businesses The Problem The Solution How it Would Work Creating new jobs in Connecticut can be expensive due to high taxation Tax incentives exist for new companies to move to Connecticut, but there are no tax incentives for existing companies to create new jobs New tax credit for any net new job created in any CT company Tax credit will be one-year credit equal to 25% of CT Withholding Tax for that position Companies would have to submit total number of employees, and net gain for the year Tax credit for C-Corps would be against corporate tax Tax credit for S-Corps, LLCs, and partnerships would be on CT K-1 Form (pass-through to income tax)

4. 3 1) Creating New Jobs in Existing Connecticut Businesses Key Benefits to Job Creation Tax Credit Provides strong incentive to create jobs Expansion of new company tax credit instituted by Governor Rell in 2006 Applies to any company, large or small –Current law is just for companies moving into CT who create 50 or more positions –Fair to existing CT companies and to small business Competitive with other states (e.g., New Jersey has similar program) While the program will cost money in the first year of a job, it will actually increase revenue to the state in year two and beyond

5. 4 1) Creating New Jobs in Existing Connecticut Businesses *Based on average salary of $44,300 (estimate from Department of Labor for 2005). Average CT withholding tax for single taxpayer would be $1,814 per year Source: General Assembly Office of Fiscal Analysis General Fund Impact Per Job* ($454) $1,814 Year 1 Year 2 Implications Net positive for Connecticut state budget over two-year period (assuming job stays in existence for two years) Total cost to state in “Year 1” could be in the range of $7-8MM, based on the number of jobs created last year (16,000 in 2006) Year 2 benefit to the state would be $29MM if the same number of jobs are created as in 2006 Potentially many more jobs will be created under the proposal than in 2006– raising both the year 1 cost and year 2 benefit Cost of Job Creation Tax Credit

6. 5 2) Eliminating Counterproductive Regulations The Problem The Solution How it Would Work Connecticut businesses are suffering “death by a thousand cuts” with regulations that discourage expansion and job creation While individual regulations were passed with the best of intentions, they often cause unintended consequences No one is looking at the ongoing costs and benefits of these regulations– some of which were passed years go The Business Advocate will conduct a comprehensive cost/benefit analysis of all regulation in the state of Connecticut over the next five years The Business Advocate will create a five-year schedule of regulation to be reviewed, starting with those believed to have high societal cost Using economic analysis of societal costs and benefits, the Business Advocate will present a cost/benefit analysis for each regulation Whenever the societal cost outweighs the benefit, the regulation shall be repealed unless the General Assembly votes to keep it

7. 6 2) Eliminating Counterproductive Regulations Benefits Costs Would require additional staff in the Office of the Business Advocate Would require more attention from the General Assembly to consider regulations where cost outweighs the benefit Systematic review of all regulation Utilizes economic measures and analytical approach, but allows for “human factor” and deliberation Automatically forces consideration of regulations where cost outweighs proposal Prioritizes early review of regulation perceived to be costly Proven concept– cost/benefit analysis successfully being utilized by other states to ensure benefit to society Benefits and Costs

8. 7 3) Attracting Next Generation Industries to Connecticut The Problem The Solution How it Would Work “Next generation” industries like biotech, nanotechnology, and fuel cells are likely to geographically cluster in the next 3-5 years (much like Silicon Valley in California or Hedge Funds in Greenwich) Urban areas are desperately in need of economic growth, but have found it difficult to attract new businesses given high taxes and sprawl to the suburbs Create “cluster zones” for next-generation industries in greater urban areas Next generation industries in designated cluster zones would be exempt from state corporate taxes, sales taxes, or property taxes for three years if they agree to stay for seven DECD will work with major urban centers to jointly designate each one a “cluster zone” around a particular industry by end of 2007 Cluster zone would include urban city, and all contiguous towns surrounding it Tax credits would start in 2008, with municipalities reimbursed by the state for any lost property taxes

9. 8 3) Attracting Next Generation Industries to Connecticut Actual cost will depend on the success of the program (i.e., number of businesses who actually move to Connecticut) Much like broader tax credit, likely to cost Connecticut General Fund in the short term (first three years), but deliver strong revenue growth in long term Benefits Provides incentives for next generation industries to cluster in Connecticut– starting a virtuous cycle of more businesses moving in to take advantage of talent pool and other resources Delivers much-needed “spark” to urban economic development currently hampered by high taxes Allows for different areas of Connecticut to play to their strengths (e.g., New Haven is perfect for bio-tech given concentration of universities) Neighboring states are pursuing the same industries, and Connecticut needs to be competitive Costs Benefits and Costs of Next Generation Industry Clusters

10. 9 Solving Additional Issues for New and Existing Businesses Housing Consolidation IssueProposal Seed Capital Many start-up and aggressive-growth companies are “under the radar” of venture capital, yet provide serious potential for job growth Support full recapitalization of Connecticut Innovations (additional $50MM, but with dividends required starting in 2012) High housing costs serve as a deterrent to companies moving into Connecticut Companies do not consider Connecticut for consolidated operations (e.g., IT operations, financial back office) Create low-interest housing loan program for workers relocating to Connecticut Double the job creation tax credit proposal to 50% of CT withholding tax for companies who consolidate 100 jobs or more in Connecticut