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While Republicans have hailed their new tax law as a boon to the private sector, New Haven business owners and city administrators are skeptical that the law will benefit the Elm City.

The Tax Cuts and Jobs Act, signed by President Donald Trump on Dec. 22, aims to spur economic growth by permanently reducing taxes for corporations and small businesses and temporarily reducing them for individuals. As a result of the new plan, the first 20 percent of profits generated by many small business will not be taxed, while the general corporate tax rate will fall from 35 percent to 21 percent.

But the law also looks as though it may raise taxes in the long term. While in the past state taxes were deductible on the federal tax return, that deduction is now capped at $10,000. As a result, many local business owners say the tax law will not help them in the long run.

“It’s a tax break for the rich, and I’m not rich,” said David Duda, owner of Book Trader Cafe. “The thought is that it’ll boost the economy and I don’t think that will happen.”

But Koffee? owner Duncan Goodall ’95 noted that small businesses have a high mortality rate and that any measures to reduce the burden on small businesses, like reducing taxes or limiting “government interference,” could help businesses thrive.

“I believe this tax cut will help marginally viable businesses become more viable,”Goodall said. “In addition, it will likely make it easier for new businesses to survive.”

Still, Goodall emphasized the tax cut is not happening in a vacuum and that other economic factors will determine its effect. Because of the lower tax rate, he said, the government will collect less money, which could lead to cuts to social welfare programs, hurting “large swaths of our most vulnerable population.”

Another factor that will determine the effect of the tax cut is the state’s own laws and the profitability of local businesses.

For businesses with high profits in states, like Connecticut, that have a high income tax, Goodall said the net effect of the new tax law will be minimal.

Still, the law was passed less than three months ago and only went into effect earlier this year. Its large-scale effects may not become apparent in the near future.

“We have no idea what the full idea of the tax cuts are going to be — no one does,” Goodall said. “The system that’s being affected is so complicated and so trying to anticipate all the possible outcomes of this fairly major change are impossible.”

New Haven Economic Development Administrator Matthew Nemerson SOM ’81 said the tax cut could ultimately upset New Haven’s economy, if the government is force to reduce aid to cities.

“The key thing for a small community like this is, what money is in the rest of the budget?” Nemerson said.

Still, he cautioned, “it’s very early to tell” the effect of the cut.

The tax bill passed in the Senate 51–48 on Dec. 19 and then passed the House 224–201 later that same day. No Democrat voted in support of the bill.

Ashna Gupta |

Chloé Glass |