State lawmakers on both sides of the aisle are still baffled by the hefty bonuses paid to employees of banks that received TARP funding, and they are considering whether to make Connecticut workers who get bonuses of at least $1 million pay more in taxes.
Democrats are heavily lobbying for the passage of a bill that they say would preserve and create jobs in Connecticut, and, for the most part, Republicans are on board.
Republicans support creating a revolving loan fund of up to $20 million to help businesses with less than 50 employees — a proposal also made by Gov. M. Jodi Rell. Both Democrats and the governor look to cancel bond authorizations to pay to for the new bonding.
Although Republicans want to see more drastic changes made to the business entity tax, they say they like that the Democrats’ bill would suspend the $250 tax for two years for businesses with at least one employee and net income under $50,000.
Republicans, however, do not like that Democrats want to add a tax surcharge for workers who get bonuses of more than $1 million from banks that accepted TARP funds, meaning that those individuals would pay 2.97 percent on top of the income tax rate of 6.5 percent on income over $1 million. The total tax rate would still be lower than the tax rates in neighboring states, said Senate Pro Tem Donald Williams Jr., D-Brooklyn, citing New York City and state’s combined tax rate of 12.6 percent and New Jersey’s 10.75 percent rate as examples.
The surcharge would apply to bonuses paid in 2010 and 2011, and Democrats say the extra revenue — estimated to be $30 million — would offset the money the state loses from the business entity tax.
“We think this is fair,” Williams said.
Sen. Leonard Fasano, R-North Haven, disagreed, questioning the constitutionality of the proposal and calling it a punitive measure.