On “Face the State” on February 15, Gov. Malloy announced plans to cut the sales tax to its lowest level since 1971. However, like many of his proposals, it is not as good as it sounds. According to his proposal, the sales tax will be reduced from 6.35% to 6.2% this year and all the way down to 5.95% in 2017. In order to pay for this reduction, certain exemptions will be eliminated, the most notable of which is the partial sales tax exemption on clothing under $50, which was supposed to be reinstated this July.
For most Connecticut residents, this proposal will really feel like a tax increase if it is approved by the legislature, rather than a tax cut as the governor claims. According to the governor’s own numbers, the lower sales tax rate will save consumers between $60 million and $70 million, but the elimination of the clothing will cost consumers $145 million. In total, this proposal is expected to yield $68 million in increased revenue for the state. If this proposal was truly a tax cut, the state would lose revenue.
Let me put this in perspective for the average consumer. If you were to purchase a pair of headphones that cost $49.99, under the current sales tax you would pay $3.18 worth of tax, but under the new sales tax you would pay $3.09 worth of tax, for a savings of nine cents. However, if you were to purchase a pair of blue jeans that cost $49.99, with the sales tax exemption you would pay $0 worth of tax, but under the new sales tax you would pay $3.09 worth of tax. If I had a choice, I would probably choose to pay a little more sales tax on regular items, if it meant I could keep the partial sales tax exemption on clothing under $50. Consumers are more likely to notice saving $3.09 on clothing, rather than a few pennies on other items.
I understand that small tax increases like this are going to be necessary to close the budget deficit. However, I have a major problem with being told that there is going to be a tax cut, when it is really a net tax increase. Gov. Malloy needs to be honest with the people of Connecticut and not insult our intelligence by hoping we won’t notice that this is really a tax increase.