June 7, 2018

Malloy vetoes bill expanding apprenticeship tax credit

Photo | Contributed
Photo | Contributed
Workers on the shop floor at Waterbury's Noujaim Tool Co., which has had success with its apprenticeship program.

Gov. Dannel P. Malloy on Wednesday refused for a second time to extend Connecticut's manufacturing apprenticeship tax credit.

Malloy vetoed Senate Bill 261, which would have granted small- and mid-sized manufacturers access to a tax credit available to larger companies that train apprentices.

The governor said the expansion would create a revenue shortfall of $650,000 unaccounted for in the bipartisan state budget.

Unanimously approved by two legislative committees, the House and Senate, the bill would have allowed investors or owners of those manufacturers to operate as so-called "pass-through entities" to claim as a credit against their state income-tax returns.

Proponents, who argue the bill would make it less expensive for them to hire, train and retain new workers, have advocated for similar legislation at least three times in five years.

But the governor says the legislation is flawed given its ability to significantly reduce the tax liability, potentially to zero, of individual investors in manufacturing companies that are structured as pass-throughs.

Malloy noted that he vetoed a similar bill in 2016.

In a letter explaining his action to Secretary of State Denise W. Merrill, Malloy said the measure "should not be used to shield individual investors from paying their fair share for state services, especially when the cost is not offset by spending cuts or other revenue."

Those supporting the tax-credit expansion during the legislative season argued the apprenticeship program has helped reduce the manufacturing labor shortage, where an estimated 3.5 million U.S. manufacturing jobs were unfilled in 2017, according to government data.

But Malloy said the U.S. Department of Treasury has said that only 10 percent of pass-through entities are small businesses, while large businesses have garnered rate cuts and increased deductions from a Republican-controlled Congress.

Still, the governor said he's willing to negotiate an amended version of the bill that limits the total deduction, which he says would better serve Connecticut taxpayers and drive small-business growth.

It's not clear whether Malloy's veto will hold.

House Speaker Joe Aresimowicz, D-Berlin, on Thursday called on the General Assembly to override Malloy's veto of the bill he says will help employers develop skilled workers.

Aresimowicz said he will urge other legislators to override the veto when the caucus reconvenes in the coming weeks. A two-thirds vote from lawmakers in both the House and Senate would be needed to override the governor's veto.

Also in support of the veto override, Senate Republican leader Len Fasano of North Haven and House Minority Leader Themis Klarides, R-Derby, in a letter to state leaders argued the bill does not create a deficit as the state budget includes a $1.8 million surplus in its general fund.

Fasano also slammed the governor's "misguided progressive views" saying "the short term loss of $650,000 will be far outpaced by the potential for job creation and economic development over the long term."

"We need to send a clear message to our state that the governor can no longer bully his political views through the legislature," he said.

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