Does CT have high business taxes? There are competing views.

That means he seeks to attract new businesses here, while working to keep those already in Connecticut from moving out.

“I spend a lot of time talking to companies in the state, and companies outside of the state — in fact, outside of the country,” he said recently after returning from the Paris Air Show, a hallmark annual event for the world’s aerospace industry, which has a major presence in Connecticut. “And the cost of doing business is always something that gets discussed.”

What do business leaders rarely ask him about? Taxes.

“The Northeast has a long perception — and I think in many ways, accurately created — that it is a higher-cost place to do business,” O’Keefe said. “But taxes don’t often come up.”

While that may be the case for him, businesses in Connecticut do have concerns about the state’s tax climate.

For example, a Connecticut Business & Industry Association survey released last September asked business leaders what main factor hinders business growth here.

According to the survey, 33% of respondents cited the lack of skilled job applicants; 21% cited the cost of living; and 12% cited high business taxes — the only items named by more than 10% of respondents.

CBIA also often promotes the Tax Foundation’s annual “State Tax Competitiveness Index,” which has been published since 2003, and for the past seven years has ranked Connecticut’s tax burden as the fourth-highest in the nation.

The 2025 report, published last October, said property taxes here are the highest in the country, while the income tax burden ranked fourth-highest.

Others, though — including O’Keefe and Fred Carstensen, director of the Connecticut Center for Economic Analysis at the University of Connecticut — take an especially dim view of the Tax Foundation index.

O’Keefe says he believes the index has political motivations, while Carstensen says it “is not a professional analysis.”

Instead, they and others prefer the annual state tax climate study produced by accounting firm Ernst & Young. The most recent version, released last December, said Connecticut is among the 12 states with the lowest business tax burdens.

It also found that Connecticut, at 32.9%, joins Maryland (29.7%) and Michigan (34.6%) as the states with the lowest business taxes as a share of gross state product.

“E&Y works with state financial officials; their analysis is thorough and sophisticated,” Carstensen said. “The Tax Foundation does not do that and has none of the sophistication of the E&Y analysis.”

Given Connecticut’s dramatically different rankings in the two studies, businesses thinking about locating here may be confused about the tax climate as compared to other states.

Dustin Nord, director of the CBIA Foundation for Economic Growth and Opportunity, says that’s the difficulty the two studies face.

“It’s challenging to measure (taxes) across states, because states have different tax systems,” Nord said. “So, you’re not necessarily comparing apples to apples.”

[ RELATED STORY: Nord hired to lead CBIA Foundation’s efforts to boost state’s competitiveness ]

Some states, for example, have county governments with taxing authority, while others, such as Connecticut, do not, which places more of the tax burden at the state level.

Ultimately, though, experts agree that while it’s generally more expensive to do business in Connecticut, taxes aren’t the primary reason for that — but the state could still find ways to improve.

Energy, workforce, commercial real estate and other expenses also factor into the cost-of-doing-business equation. Lately, Connecticut’s highest-in-the-nation electricity prices have generated the loudest concerns from business leaders and policymakers, with O’Keefe calling them an “existential threat” to the state’s continuing economic progress.

Lawmakers did pass some energy reforms this past session, which will reduce costs immediately by removing public benefits and other charges from ratepayer bills. However, the state will now borrow money to cover those costs.

In another closely watched study, CNBC’s “America’s Top States for Business,” Connecticut ranked as the 28th best state in the country in 2025, an improvement from No. 32 in 2024. However, the state ranked worse in the cost-of-doing-business category at No. 44.

The index

Hartford Business Journal reached out to both Ernst & Young and the Tax Foundation to discuss their business tax studies.

Despite repeated attempts, no one from the Washington, D.C.-based Tax Foundation responded.

As it explains in its report, the foundation scores states on five “tax code components”:

• Corporate taxes;
• Individual income taxes;
• Sales, use and excise taxes;
• Property and wealth taxes; and
• Unemployment insurance taxes.

States without one or more of those, such as those with no sales tax, do better in the index, as do states that have all five but impose them at moderate rates.

“Taxes are not everything, but they do matter,” the foundation report explains, while adding, “the index measures tax structure, not all the other things businesses care about,” such as an educated workforce or quality of life.

Connecticut’s ranking in the index has been remarkably consistent. In 2018, it ranked 44th. Every year since, it has ranked 47th, or fourth from the bottom.

In the latest study published last October, Connecticut ranked No. 50 in the property taxes category. It fared better in the sales and corporate taxes categories, ranking No. 21 and No. 31, respectively.

The foundation noted that Connecticut’s “corporate income tax rate is high at 7.5 percent, though still lower than in other New England states, such as Massachusetts and Delaware.”

Notably, state lawmakers in the recently completed legislative session approved a two-year, $55.8 billion budget that extends a temporary 10% corporate tax surcharge for three more years.

The surcharge — which applies to companies that have at least $100 million in annual gross income and has been in place since 2009 — is expected to generate $128 million in tax revenue over the next two fiscal years.

The Tax Foundation also said the state’s sales tax rate of 6.35% is competitive both nationally and regionally.

While the Tax Foundation describes itself as “the world’s leading nonpartisan tax policy nonprofit,” O’Keefe disagrees, claiming it has “a political ideology.”

“The Tax Foundation is funded by the Koch brothers,” he said, referring to the wealthy conservative libertarian family. “They have a view that taxes are bad, that taxes should be zero, taxes should be flat, they should be simple, and we get penalized for a progressive income tax.”

As proof of the index’s bias, O’Keefe — an enthusiastic supporter of the Democratic Party who has volunteered as a fundraiser for national campaigns since the late 1990s — noted that in 2023 Connecticut approved $600 million in tax cuts, the largest cut in the state’s history, “and our ranking didn’t move an inch.”

Those tax cuts included income tax relief, a car tax freeze and an extended gasoline tax holiday.

Where can CT improve?

So, whether you believe the Tax Foundation index or the Ernst & Young study, experts agree that Connecticut could do better.

Roberti, who suggested placing the studies in the context of the state’s fiscal condition, said he believes Connecticut “actually is in pretty good shape.” But he still has suggestions.

He notes that Connecticut’s base corporate tax rate and the 10% surcharge imposed on some companies puts the state “in the upper end of corporate taxes in the country.”

Worse, he said, it caps most business tax credits at 50.01% of the current year tax. While it recently expanded the research and development tax credit for bioscience companies to 90%, most companies still can’t use 100% of their tax credits.

Nord said CBIA has talked for years about the state’s 0.26% capital base tax as “one that we’ve hoped to eliminate.” Only 16 states have a tax on capital, he said, “and that has a chilling effect on companies, especially small companies and biotech people that have accumulated capital, but aren’t making profits yet.”

Chris Davis, CBIA’s vice president for public policy, said a productive first step for the state would be to restore the pass-through entity tax credit to its original level of 93.01%. It currently is capped at 87.5% of the total tax paid.

“This would return over $60 million to over 120,000 small businesses across the state, providing much-needed capital for hiring new employees, investing in new equipment or expanding their business,” he said.

Davis said CBIA also is concerned about the results of the recently completed legislative session. While the state has improved its finances over the past seven years, the new two-year budget uses fiscal guardrail workarounds and more than $357 million in business tax hikes to increase state spending by $2.6 billion over the next two years.

In addition to the corporate surcharge, the budget raises additional revenue from corporations through changes to the unitary tax and net operating loss carry forwards.

“There’s a lot of concern within the business community that the stability and predictability and, quite frankly, sustainability that we’ve had over the last several years is now in question,” he said.

Senate Minority Leader Stephen Harding Jr. (R-Brookfield) agrees.

“It’s a very slippery slope the legislature is going down,” Harding said. “When we pass tax structures that increase taxes on businesses and corporations, we’re not making us much better.”

House Speaker Matthew Ritter (D-Hartford), though, says the tax increase in the biennial budget affects only some large corporations, and agreed that when he speaks with business leaders they mostly talk about predictability.

“I feel we are in a good position,” Ritter said. “It’s a drastic change from 10 years ago. … Ask Moody’s and S&P. Our credit rating has gone up.”

He added, “We’re never going to be as cheap as the southwest part of the country. But in terms of looking at our peer states in this region, we very much punch above our weight.”

Editor’s Note: This is the first installment of a four-part series called “CT’s Economic Competitiveness.” The series will explore Connecticut’s economic competitiveness nationally and globally in several key areas, including taxation, regulations and workforce development. The series will run in print issues and online in July and August.