April 2017

The Cost of Business Tax Breaks in Connecticut

Derek Thomas, M.P.A.

In a new report, Connecticut Voices for Children estimates the costs of business tax breaks in fiscal year (FY) 2017 to be $707 million. The report highlights that, unlike strategic investments, such as education and health care, the full cost of business tax breaks is unknown, and their effectiveness is not analyzed according to nationally-recognized best practices.

Among the report’s findings:

  • From FY 2002 to FY 2017, according to available data, the cost of all business tax breaks (credits, deductions, and other policy choices) increased from $661 million to $707 million (in 2017 dollars).

  • From FY 2016 to FY 2017, the cost of business tax breaks (in absolute dollars) increased by $12 million while spending on children (as defined by our Children’s Budget) decreased by $81.2 million.

The report offers several recommendations to shed more light on the costs of business tax breaks, such as:

  • Require regular review of business tax breaks

  • Prepare for GASB 77 data;

  • Expand the scope of the tax expenditure report; and

  • Require corporate tax disclosure.

Issue Area:
Budget and Tax