By Edward Krudy
NEW YORK (Reuters) - Connecticut Governor Dannel Malloy on Friday proposed cutting planned business taxes by $223.7 million over two years after several large corporations threatened to leave the state.
Connecticut's state legislature passed a $40 billion biannual budget last week that hiked taxes by $1.2 billion over the next two years, prompting a backlash from businesses including General Electric (NYSE:GE) Co, Travelers Companies Inc and Aetna Inc (NYSE:AET).
Aetna and GE, both of which have headquarters in the state, have said they would consider leaving Connecticut. GE's Chief Executive Officer Jeff Immelt said he had already assembled a team to look for alternative locations.
Malloy's plan involves scrapping a proposed increase on a tax on data processing, deferring the introduction of company-wide taxation, and raising a tax credit cap.
Malloy, a Democrat, said he will ask the legislature to make cuts by 1.5 percent across the board.
"Even as we have one of the lowest effective corporate tax rates in the nation, these steps are being made to protect Connecticut's long-term interests," Malloy said in a statement.
Connecticut's lawmakers will meet this month in a special session to implement the budget plan. That would allow them to pass Malloy's amendments before the start of the fiscal year on July 1.
"While the Connecticut business climate continues to be very challenging, this announcement is a step in the right direction. We will review these changes in more detail and monitor developments through the special legislative session," a spokesperson for Aetna said in a statement.
Last week's spending plan extended a temporary 20 percent surcharge on corporate tax, which makes Connecticut's effective corporate tax rate 9 percent, compared with a base rate of 7.5 percent, the fifth-highest in the nation, according to the Tax Foundation.
"The governor and the legislature should do the right thing for small and large businesses and the citizens of Connecticut to improve the economic vitality of the state," GE said in a statement. The company did not comment on the substance of Malloy's proposals.
Travelers said it was "pleased that the governor has listened to the concerns expressed by the business community and has proposed changes to the budget."
"We will closely monitor the legislature's reaction to these proposed changes," the company said.
Malloy's revised plan also calls for revenue generated through sales tax on car washes and parking to be eliminated. Taxes on Internet services would be set at 1 percent.