CT ponders penalty for businesses replacing workers with AI. ‘As scary’ as that should be’: lawmaker

Hartford Courant – Thursday, April 2, 2026
By Kaitlin McCallum

As artificial intelligence increasingly replaces workers, a bill in the Connecticut legislature aims to tax businesses that lay off employees due to technology in order to fund retraining programs, and reward companies that increase productivity but maintain their workforce.

Senate Bill 515 was voted out of the Finance Revenue and Bonding Committee Monday, 34-20 with Republicans opposing it. It now goes for consideration by the legislature.

The bill directs the Office of Policy and Management to create a plan for “a workforce and productivity gap surcharge on employers to recapture lost revenue from displaced employees while providing a permanent tax exemption for increased productivity achieved through the augmentation of a stable workforce using collaborative technology.”

Sen. John Fonfara, a Hartford Democrat who co-chairs the committee, introduced the bill before the vote, saying that while his initial thought on the issue was the loss of state revenue, his concern is more for workers and their families.

“At a high level we all know that we can not get through a day today without hearing the two letters that are most prominent in the dictionary these days, AI, and that while it seems to be futuristic, I personally believe it is not. I believe it is already impacting our economy and maybe for the better right now but at some point it could be anything but.

“This initiative is not about discouraging companies from advancing, using technology — by no means. … This is about cognitive displacement and the real likelihood that artificial intelligence could render many folks in this very room unnecessary, as scary as that might be and should be.”

Fonfara said the issue is a grave one with implications that will likely see AI replacing workers in the next decade.

“I don’t know what that means for society in general. I don’t know what that means for the worth of the individual and their family.”

But Republicans on the committee said the bill would harm Connecticut businesses.

Sen. Ryan Fazio, a Greenwich Republican on the committee who is running for governor, voted against the bill. Fazio said instead of taxing companies for their use of technology, the state should aim to make its “workforce more productive with higher wages and more jobs than ever before” through its labor rules and tax policy.

“I fear that if we impose a new tax on job creators or businesses, that at the end of the day we’re going to see fewer jobs than otherwise.”

State Rep. Dave Rutigliano, a Trumbull Republican, echoed Fazio, saying that the business climate in Connecticut in some cases is forcing businesses toward technology.

“Some of this stuff that’s going to happen has been imposed by the state of Connecticut. We are raising costs on certain businesses so much that they’re going to have to adapt or die. So I don’t think we can just look at this in a vacuum of AI, which I may share your perspective on it, but there’s more to it than that,” he said.

Rep. Nicole Karides-Ditria, a Seymour Republican, said the bill would “fund the future by penalizing progress.”

Christopher Davis, vice president of public policy for the Connecticut Business & Industry Association, said SB 515 takes “a fundamentally flawed approach” by “taxing increased productivity.”

“By linking a surcharge to changes in revenue, payroll, and workforce metrics, the bill effectively punishes employers for becoming more efficient—even when those gains are driven by investments in technology, process improvements, or capital upgrades,” Davis wrote in testimony.

“Connecticut employers must continually invest in new tools, automation, and collaborative technologies to remain viable. Senate Bill 515 creates uncertainty around how those investments will be evaluated and taxed, discouraging businesses from pursuing efficiency improvements that would otherwise benefit workers and consumers alike.”

Neither Daniel O’Keefe, commissioner of the Department of Economic and Community Development, nor Dr. Kelli-Marie Vallieres, the state’s chief workforce officer, offered criticism of the proposal. Both noted that funding to enable it was not included in the governor’s budget.

Vallieres, of the Office of Workforce Strategy, cited “the rapid expansion of the use of artificial intelligence (AI) intelligence in the workforce” and lauded the bill’s intent.

“Unfortunately, funding for the development and implementation of this plan was not included in the Governor’s Budget, so resources would need to be identified for this to move forward,” she said in written testimony. “OWS appreciates the intent of this bill and looks forward to the continued discussion on how to best protect the workforce while supporting the growth of our state.”

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