The $400 million deal between Gov. Dannel Malloy and United Technologies Corp. will reduce state revenues over the next 15 years by at least as much as a quarter-point reduction in the corporate tax rate.
The deal allows UTC to use otherwise unusable tax credits in return for a making capital investments in Connecticut.
In 2016, the first year of the UTC deal, state officials expect the corporate tax to bring in $631.2 million. Under current law, the corporate tax rate in 2016 will be 7.5 percent after the expiration of a surcharge bringing the rate to 9 percent.
The $20 million in potential extra credit for UTC amounts to 3.1 percent of corporate tax revenue.
If the General Assembly had instead reduced the corporate tax rate by 3.1 percent it would fall from 7.5 percent to 7.27 percent. For the first five years of the deal, with the extra credit capped at $20 million per year, the effect of the deal hovers between a 7.25 and 7.3 tax rate.
After the initial five years, the cap increases to $33.3 million annually, and the effective tax rate falls below 7.25.
These projects assume no dynamic effects of reducing the corporate tax. A reduction in the corporate tax rate could increase corporate taxes and revenue from other sources, mitigating the projected loss of revenue.