Public Is Divided On Lamont’s Tax Proposal
HARTFORD, CT — Taxpayers from every walk of life descended on the Legislative Office Building to offer their opinions Friday on the first public airing of Gov. Ned Lamont’s tax proposals.
Some were in support, others in opposition, and some offered their own alternatives.
The Progressive Caucus within the Democratic Party, which held a press conference before the public hearing on the tax bills, said they would like to see a half percent increase in the income tax on top income earners. The top rate for individuals making $500,000 a year and couples making $1 million a year is currently 6.9 percent. The caucus would like to see it increased to 7.49 percent.
Rep. Anne Hughes, D-Easton, one of more than 40 members of the caucus, said that would raise enough to cover the revenue needed to spare home goods and services from the elimination of the sales tax exemption, and there would no longer be any need for the sugary beverage tax.
“If we’re going to expand the tax base we need to exempt basic household goods,” Hughes said.
Preliminary estimates from the Office of Fiscal Analysis show that an increase of a half a percent on top income earners would raise about $227 million.
Hughes said they are also exploring increasing the capital gains tax rate.
There are all these other “sacrifices and impacts, including tolls on everybody, but there’s nothing being asked of the wealthy,” she added.
Office of Policy and Management Secretary Melissa McCaw said Lamont is open to discussing Connecticut’s tax structure with any lawmaker but she said he has been clear about how he feels about changes to the income tax. Lamont has said repeatedly that he doesn’t favor an increase in the income tax.
Senate President Martin Looney, D-New Haven, agrees.
He said one-third of the income tax is highly volatile from year to year, “so I think we need to find some other way to expand the responsibility for needed revenue outside the income tax.”
But Looney warned they should do it in a way that’s not regressive.
There were dozens of others who attended the Finance, Revenue and Bonding Committee public hearing encouraging members not to take away their sales tax exemptions.
From lawyers to accountants, more than 120 members of the public signed up to testify on the governor’s tax package.
Lincoln Woodard, president of the Connecticut Trial Lawyers Association, said requiring the legal community to implement a 6.35 percent sales tax on their services would cause “undue harm” to his members’ clients.
The tax is scheduled to bring $35.3 million in the first year and $71.7 million in the second year of the governor’s budget.
“Taxing legal services is simply not a viable way to raise revenue,” Woodard said. “It would create a barrier to the unalienable right to justice.”
The expansion of the sales tax base is expected to bring in $371 million in 2020 and $652.6 million in 2021.
The biggest portion of that would come from repealing the sales tax exemption on vehicle trade-ins.
“Repeal of the trade-in tax credit will on average increase the cost to a consumer financing a vehicle by $1,200-$1,500,” Jeff Aiosa, owner of Mercedes Benz of New London, said. “This kind of price increase will directly impact consumer behavior resulting in delayed or postponed sales, sales of less expensive vehicles, or worse, no sales at all. This burden will affect all consumers trading in a car.”
With repeal of the trade-in exemption, Connecticut will stand alone in the Northeast as the only state to tax trade-in vehicles.
“All states, with the exception of California, that have a sales tax on motor vehicle sales similar to Connecticut’s, have some type of allowance exempting the trade-in from the sales tax,” Jill Silverman, owner and assistant general manager of Richard Chevrolet, said. “More importantly, all northeastern states, with the exception of New Hampshire, which has no sales tax, give consumers a trade-in exemption.”
The Progressive caucus, which is seeking changes to the overall package, also expressed their opposition to a tax on sugary beverages.
Lamont’s budget proposed a 1.5 cent per ounce tax on sweetened beverages. That amounts to about 18 cents on a 12 ounce can or $2.16 cents on a 12-pack of soda or a $1.92 tax on a gallon jug of iced tea.
Dr. David Katz, director of Prevention Research Center at Yale University and Griffin Hospital, said sugar-sweetened beverages “are really the tobacco of our time.”
Opponents, including the Progressive Caucus, argue the tax is regressive.
Rep. Juan Candelaria, D-New Haven, said the sugary beverage tax will disproportionately impact working- and middle-class families.
“Obesity and diabetes are horribly regressive,” Katz said.
He said it’s just a fact the obesity and diabetes are also impacting those communities at a greater rate and “that’s regressive.” He said the cost of those diseases “dwarf” the cost of the tax.
Katz said taxing sweetened beverages actually levels the playing field. He said no one in any of these communities is going to go thirsty if they can’t buy soda.
The sugary beverage tax is expected to generate $163.1 million in the second year of the budget.
Meanwhile, Lamont’s revenue proposals also had supporters.
The two-year budget released Feb. 20 doesn’t make many changes to the spending side of the budget.
The decision to increase spending slightly did not go unnoticed by advocates for the poor, disabled, and elderly.
A number of advocates for the individuals who receive services in some way from the state came to testify Friday in favor of Lamont’s revenue proposals.
Ben Szczerbicki, a recovery coordinator for Reliance Health, Inc., said he wanted to encourage the Finance, Revenue, and Bonding Committee to “make the difficult decisions require to increase state revenue.” He said the revenue is necessary to fund the services that saved his life.
He was one of many to testify in favor of the tax increases.
“If this committee doesn’t pass a budget with sufficient revenue to support the funding needed to maintain those programs, there will be no choice but for the Appropriations Committee to make additional cuts — cuts the folks who participate in these programs simply cannot afford,” Kathy Flaherty, executive director of the CT Legal Rights Project, said.