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Raising The State Sales Tax Not Off The Table

Raising The State Sales Tax Not Off The Table

Hartford Courant, March 31, 2017

As the state needs millions to close a projected budget deficit of $1.7 billion in the next fiscal year, increasing the 6.35 percent state sales tax is one option.

House Speaker Joe Aresimowicz of Berlin said he has studied the numbers closely in the $20 billion annual budget and won't rule out tax increases.

"I don't think we can go into these negotiations taking anything off the table," he said. "I'm open to any and every idea out there. ... That might be sales tax. That may be user fees."

The legislature's 24-member Black and Puerto Rican Caucus said this week that raising taxes must be part of the budget discussion to close the budget gap. In addition, state AFL-CIO president Lori Pelletier testified recently that the legislature must consider possible changes in tax exemptions, which includes some products that are currently exempt from the sales tax.

CCM calls for using sales tax back to top

The Connecticut Conference of Municipalities has also called for raising the sales tax rate as a way to generate money for cities and towns, along with eliminating some sales tax exemptions.

But the Connecticut Retail Merchants Association is already working hard against the idea.

"An increase in the sales tax would have a real negative impact on retailers," said president Timothy Phelan, representing an industry with about 470,000 jobs at 42,000 Connecticut retail shops. "It is going to drive more business to the Internet, and that means less sales tax in Connecticut. The independent retailer is feeling it every day. They're hanging on. It doesn't take much to be facing real stress, real challenges."

The retailers who are operating on tight profit margins are facing a daily battle with Internet sales.

"You can buy anything online – a lamp, a box of chocolates," Phelan said.

Malloy is currently avoiding the idea, saying he is not ready to talk about taxes until he hears solid ideas from legislators on spending cuts – and lawmakers will be working on that for the next four weeks and beyond.

"I won't even entertain it until there's evidence of a real desire to develop a budget,'' Malloy said Thursday morning. "Right now, you're hearing this discussion about additional taxes without anyone putting any real cards on the table about what their priorities are. I think that's a gigantic mistake to be talking about taxes – sales tax or any other form of additional revenue – without understanding where people are on making the sacrifices and the hard decisions that have to be made.''

Malloy added, "I'm not going to entertain a revenue-driven discussion. Listen, I'm not afraid of revenue. I think I've shown in situations that were impossible to adapt to in the short run, I was more than willing to do that.''

Malloy signed the two largest tax increases in state history in 2011 and 2015.

State Rep. Mary Mushinsky, a Wallingford Democrat who is the longest-serving legislator in the House, said the sales tax is "on the table,'' but she has not made any final decisions yet on how she will vote.

In his budget proposal, Malloy is calling for increasing the cigarette tax to $4.35 per pack, up from the current $3.90 per pack. If approved, Connecticut would be tied with New York for the highest cigarette tax in the nation. Senate President Pro Tem Martin M. Looney of New Haven, the highest-ranking senator, is backing Malloy's plan for health and financial reasons. Along with increases on cigars and smokeless tobacco, the state expects to collect an additional $60 million on tobacco in the fiscal year that starts on July 1 if the hikes are approved by the legislature.

But Brice O'Brien, executive vice president for public affairs for the parent company of R.J. Reynolds Tobacco Co., wrote to lawmakers that the proposed hike would "create undue burden for the lower-income workers" across the state. The cigarette tax was increased under Malloy in 2011, 2015 and 2016 to the current level.

An even larger tax increase would be the elimination of the $200 property tax credit that goes largely to the middle class. The credit was as high as $500 under Governors John G. Rowland and M. Jodi Rell, but the total has been decreasing in recent years. If the credit is eliminated completely, the state deficit would be reduced by $105 million per year.