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State Senators Lay Out Blueprints For Creating Jobs

MARA LEE

February 02, 2010

When unemployment is higher than it's been in 30 years, politicians are eager — even desperate — to show they have the answers.

Jobs plans, as a result, are flying fast and furious now that President Barack Obama has weighed in, campaigns are taking shape, and the state legislative session is set to open Wednesday.

On Monday, Republican U.S. Senate hopeful Rob Simmons used two Hartford-area businesses as a backdrop for his message of lower taxes and the importance of small business. Simmons toured RSL Fiber Systems, a 14-person defense contractor in East Hartford.

At the same moment, state senators from the Democratic majority used Sen. Jonathan Harris' dry cleaner as their platform to talk about their jobs plan.

"Sedgwick Cleaners, which is my dry cleaner, is an example of a small business that keeps a community alive," said Harris, who represents West Hartford. "And this bill helps keep small businesses alive. ... We need to protect and grow these types of businesses "

Voters are angry that politicians have not been able to fix the economy yet. Elected officials, and those who hope to join or oust them from office, want to look responsive — not to mention their sincere desire to hasten a robust recovery.

The president's declining public approval ratings, as well as the Republican victory in the recent special election for U.S. Senate in Massachusetts, are evidence of the electorate's fickle mood, which heightens the stakes, said Scott McLean, a professor of political science at Quinnipiac University.

"Nothing puts the fear of God in an incumbent quicker than a bad economic time," McLean said.

But in reality, it's hard to know what might spur faster private-sector job growth. And, especially at the state level, where the government's ability to borrow money and pour it into the economy is strictly limited, the government's toolbox is sparse compared with the power of a business cycle.

Tax Cuts Big And Small

The proposed plans range from trivial to massive.

The state senators' top economic proposal: sparing mom-and pop-businesses the $250 annual business entity tax for two years. They also want to start a government-run revolving loan pool for small businesses, and consolidate economic development agencies.

To pay for the proposals, they want to put an income tax surcharge on bonuses of more than $1 million paid to workers at banks that took federal bailouts.

"It's almost a concept of restitution — taking it back from Wall Street and giving it to businesses on Main Street," said Donald Williams, D-Brooklyn, the highest-ranking state senator.

Ed Deak, an economics professor at Fairfield University, and an economics adviser to Gov. M. Jodi Rell, said the $250 break would provide a "psychological lift" to business owners who are irritated by the fee. "It would certainly make the state look a little more business-friendly," he said.

Giovanni Tomasi, CEO of RSL Fiber Systems, has certainly found Connecticut business friendly. The company is housed in a taxpayer-backed technology incubator, a location it was offered when it moved from New Jersey. Its research has been funded by the Navy and giant defense contractor Northrop Grumman. It has a federal-guaranteed loan through the Small Business Administration.

And 100 percent of its sales come from the U.S. Navy, by acting as a subcontractor for Northrop and for General Dynamics.

Still, Tomasi complained vociferously about taxes, and Simmons, a former U.S. representative, agreed on every point, punctuating his jobs plan. "The problems first and foremost are taxes," Simmons said.

"We expect that in the next 18 to 24 months, we will double in size," Tomasi said. If we have to pay more taxes, we cannot invest it into our employees, into research and development."

For example, Simmons and Tomasi do not want the Bush income tax rates for top earners to expire; Tomasi, like many business owners, pays out profits to him and his partners as income. The stimulus bill Congress passed in early 2009 was misguided, Simmons said, going to "big business, big banks, big Detroit. Small business was too small to pay any attention to."

The stimulus bill did have tax breaks limited to small businesses, expedited tax refunds and the elimination of fees on SBA loans — but not enough for Republicans.Credit For Credits

Along with the stampede of ideas comes the partisan arguments — not just which initiatives work best, but who came up with the ideas first.

Simmons said Obama's proposal of a $5,000 tax credit for businesses that add full-time workers in 2010, with a benefit limit that keeps small businesses as the focus, was "a step in the right direction."

Linda McMahon, another Republican running for U.S. Senate, also called some of Obama's business proposals "meritorious." She cited his plan to make permanent a Bush-era tax credit for research and development.

But Simmons said the related administration proposal, a 6.2 percent tax rebate for small businesses that spend more on payroll in 2010 than the inflation rate, was too limited. He said no small business should pay that 6.2 percent Social Security match, and neither should their employees, for six months or a year. About half of private-sector workers would be covered by that tax break.

Deak said, "And how does he propose funding Social Security?"

State Sen. Len Fasano, R-North Haven, said Republicans were years ahead of Democrats in championing small businesses. "We're glad they're finally seeing the light and moving in our direction," he said.

Fasano predicted the Senate Democrats' tax cut proposal would garner broad, bipartisan support. But, he added, Republicans might have trouble accepting the surcharge on bonuses that the Democrats are proposing. "Twenty percent of the people pay 80 percent of the taxes in the state of Connecticut," he said.

Both Simmons and the Democratic state Senators complained banks won't lend to small businesses, even when government guarantees are available. Quick hit policy changes, such as offering tax breaks to small businesses and creating loan funds, are easier to get passed— and claim credit for — than big, often divisive issues such as health care overhaul or financial regulation, said McLean, the Quinnipiac professor. "Voters are impatient," he said.

But ultimately, there's a danger that the administration proposals could cost billions without getting great results, said Deak, who wondered whether the $5,000 credit would be enough.

University of Maryland Economics Professor Peter Morici said it wouldn't be. He believes the only thing that will jump-start the recovery is declaring war on China's protectionist policies. If Chinese imports become more expensive, retailers will buy more American-made goods, he said.

Courant staff writers Christoper Keating and Daniela Altimari contributed to this story.