Democrats’ new tax plan drastically cuts back Lamont sales tax expansion

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Gov. Ned Lamont’s plans to dramatically widen the sales tax were dealt a blow Wednesday, as Connecticut’s tax-writing committee unveiled its own tax plan.

The Finance Revenue and Bonding Committee budget only extends the sales tax to interior design services, some parking services, transportation companies like Uber and Lyft, safety apparel, and non-coin operated dry cleaning.  Gov. Lamont has proposed adding everything from haircuts to veterinary visits.  Both plans also extend the sales tax to digital downloads like Netflix.

Included in both budgets are a 10 cent charge on plastic bags and a new e-cigarette tax, although lawmakers are proposing a smaller tax than Gov. Lamont.  Meals would also be subject to an additional 1 percent local tax, an idea that has failed in past years.

"The revenue increases in this bill are minimal, they are recurring, and they are predictable,” says committee chair state Sen. John Fonfara.  “That's the fiscally responsible thing to do." 

Lamont and fellow Democrats appear to be headed for a showdown over how much to tax the state’s wealthiest residents.  The legislature’s plan includes a new surcharge on investment income, called “capital gains,” for couples making more than $1 million a year.

There are also several tax cuts, including eliminating Connecticut’s gift tax and a $250 business entity tax.  Craft brewers would also pay less, and the plan phases out the capital base tax, which helps state manufacturers and start-up companies.

The Democrat-controlled Finance, Bonding, and Revenue Committee approved the new tax plan Wednesday evening, which will be sent on to the full General Assembly. Gov. Lamont and lawmakers will spend the next month negotiating a final package.  The legislative session ends June 5, but lawmakers can technically wait until June 30 to pass a new two-year budget.

Gov. Lamont warned about putting too much spending on the state’s credit card.

“The markets have spoken and we need to heed their warnings,” he said.  “What the markets and businesses are telling us is clear: Cut back on the borrowing while maintaining our state’s infrastructure, get the state on firmer fiscal footing, focus on a reliable, sustainable solution for transportation investment, and get the state growing again."

Revenue bill highlights (courtesy CT Senate Democrats):

  • Eliminates gift tax
  • Eliminates $250 business entity tax
  • Phases-out capital base tax, which helps state manufacturers and start-up companies
  • Eliminates real estate conveyance tax for those with crumbling foundations
  • Tax cut for craft breweries
  • Uses $100 million of state surplus ($50 million in each fiscal year)
  • Maintains the hospital tax, which accounts for approx. 50% of the new revenues needed in the next biennium
  • Capital gains tax instituted in second year, affecting only (for example) married joint filers making $1 million+ a year who have capital gains (NOT payroll income)
  • E-cigarette (vaping) tax
  • Increase tax on alcohol
  • Slight broadening of existing 6.35% sales tax to five items: interior design services; some parking services; transportation companies like Uber; safety apparel; non-coin operated dry cleaning
  • Institutes full sales tax (instead of just 1%) on digital downloads
  • 10 cent tax on paper/plastic bags (with some exemptions)
  • Creates a 1% additional local meals tax to go to cities and towns
  • Continues the bipartisan budget postponement of GAAP changes
  • Continues (does not phase-out) the corporate surcharge tax in the bipartisan budget

Republicans blasted the new taxes and fees, and accused Lamont of getting "pushed around by members of his own party." 

“Is he going to take a stand on anything, or is he going to continue operating in fear of Democrat legislators?” asked state Sen. Len Fasano (R – North Haven).


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