Governor Lamont proposes a simple, transparent, targeted, earn-as-you-grow incentive program for businesses to expand in or relocate to Connecticut. The benefit is earned as jobs are created and maintained over time, mitigating the risk inherent in traditional economic development approaches. And the program directs investment into emerging and focus industries to build on our strengths of today and develop the ecosystems of tomorrow.
For too long, Connecticut has promoted economic development primarily by providing ad-hoc incentives for large businesses to locate here. That approach invited companies to play states off one another, produce limited durable investment in the state, did little to support medium-sized businesses that cannot attract the same level of attention, and did nothing to help home-grown businesses and entrepreneurs.
Governor Lamont’s Solution
Governor Lamont proposes incentivizing employers in focus industries to create a minimum of 25 new full-time equivalent positions with salaries above $37,500 or 85% of the median household income of the municipality where the jobs will be located, whichever is greater. Employers that hit and maintain those benchmarks for at least two years will receive a fully refundable rebate equal to 25% of the withholding taxes from the new FTEs over the next five to seven years that they can reinvest in their business. Rebates per job range from $1,000 to $5,000 per year, except for jobs that are created in calendar year 2021 which will have a minimum rebate of $2,000 per employee. Rebates per employer are capped at $40 million in tax rebates per fiscal year under this program. Re-hiring for jobs lost as a result of the COVID-19 pandemic will not count towards the minimum 25 new FTEs.
The benefits of this new approach include:
- Incentivizing good paying jobs. The additional requirements for companies to pay their employees at least $37,500 or 85% of the median household income of the municipality where the jobs will be located is designed to ensure we are focused on raising incomes and not incentivizing low paying jobs. Additionally, the programs $1,000 rebate minimum ensures all companies that are relocating to or expanding in the state receive a minimum benefit, which ensures we stay competitive with neighboring states.
- Supporting companies that hire individuals from disadvantaged backgrounds. The Governor’s proposal allows companies that hire a large proportion of their employees from disadvantaged backgrounds, such as the formerly incarcerated, to participate in the program even if the jobs created at the companies don’t otherwise meet the $37,500 or 85% of median household income requirement.
- Investments in strengths of today and ecosystems of the future. The proposal is targeted at specific sectors that are integrated with the state’s broader economic development strategy: aerospace and defense, clean energy and renewables, entertainment and digital media, financial services, information technology, life sciences, manufacturing, and R&D facilities.
- Focus on distressed municipalities and Opportunity Zones. While companies around the state that grow 25 jobs or more are eligible for a 25% rebate against withholding taxes, those that locate or expand in distressed municipalities or Opportunity Zones are eligible for a 50% rebate. We believe this added incentive will help drive investment and job creation to areas of the state that will have the most impact.
- Significant reduction in bonding. Previous economic incentives required an average of $200 million in bonding per year. Over the past year, DECD has been able to reduce its bonding by close to 70%. This program does not require any bonding and will help the state continue to reduce debt service or prioritize bonding for other types of investment.
- Right sized Incentives. Under the previous incentive programs, the state paid over $16,000 per job on average. We anticipate the cost per new job in the focus areas to be between $5,000 and $10,000, depending on FTE wage.