Chamber submits testimony in support of extending Manufacturing Apprenticeship credit

Testimony submitted on behalf of the Chamber to the Commerce Committee in support of extending the Manufacturing Apprenticeship Tax Credit to pass-through entities, which has been included in our Annual Legislative Agenda for the past several years:

STATEMENT OF THE WATERBURY REGIONAL CHAMBER TO THE COMMERCE COMMITTEE SUPPORTING RAISED HOUSE BILL 5212: AN ACT EXTENDING THE MANUFACTURING APPRENTICESHIP TAX CREDIT TO PASS-THROUGH ENTITIES
Senator Hartley, Representative Simmons, and members of the Commerce Committee, my name is David Krechevsky and I am the Director of Public Policy & Economic Development for the Waterbury Regional Chamber. Thank you for the opportunity to submit testimony on this legislation.

The Waterbury Regional Chamber, which serves 14 communities in Greater Waterbury and represents the interests of nearly 1,000 member businesses on matters of public policy, strongly supports Raised House Bill 5212 (LCO 1432), An Act Extending the Manufacturing Apprenticeship Tax Credit to Pass-Through Entities.
This legislation addresses an issue that is important to many of the Chamber’s smaller manufacturing members. It is a way to address the ever-growing need in the state for trained, skilled workers in manufacturing. Our state’s major defense contractors — General Dynamics Electric Boat, Pratt & Whitney, and Sikorsky Aircraft — are seeking to hire tens of thousands of workers to meet production needs over the next decade or more.

Unfortunately, Connecticut continues to have a shortage of people with such skills, despite the state’s best efforts to train new workers. In addition, according to the state Department of Labor, more than 35 percent of workers in the state’s manufacturing industry are over the age of 54, the largest cohort of older workers for any industry sector in Connecticut. With so many workers enticed to work for larger manufacturers, while others are nearing retirement age, it leaves smaller manufactures — many of which are pass-through entities, such as subchapter S and limited liability corporations — to wonder where they will find the skilled staff they need, both now and in the future.

One way to address this is for the state to reduce the cost for smaller manufacturers to hire and train apprentices. Training apprentices is costly — they are paid while they learn and are not as productive at the start as they will be when their training is completed.

Additionally, trained workers must devote time to training apprentices, which adversely affects productivity. Providing smaller manufacturers with the opportunity to use the apprenticeship tax credit will encourage them to hire and train the workers they need, while easing the effect on their bottom lines.
Currently, pass-through entities cannot utilize this tax credit, which is available to larger firms. It doesn’t make sense to prohibit smaller manufacturers from doing what larger firms can do. Approving this legislation will level the playing field for all manufacturers.

The Chamber and our members understand there is a cost associated with this bill, in the form of lost tax revenue. We argue, however, that the financial return to the state in the form of income taxes paid as a result of the new jobs created, as well as the increased economic output that will result, outweighs the initial cost.
In 2017, both houses of the state legislature approved a bill to extend the tax credit to pass-through entities, but it was vetoed by then-Gov. Malloy. The Chamber hopes the General Assembly will send this bill to Gov. Lamont and convince him of the need to sign it into law.

For these reasons, the Chamber asks the committee to approve HB 5212.
Thank you.
David Krechevsky
Director of Public Policy
Waterbury Regional Chamber