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Connecticut considers sales tax increase


 A sales tax rate increase is under consideration in Connecticut.

Should Connecticut increase its sales tax rate from 6.35 percent to just under 7 percent? The Connecticut Legislature is looking at several options to raise revenue, and a sales tax hike is one of the proposals on the table. Higher real estate taxes and additional taxes on the highest income bracket are also under consideration.

The proposals are in sharp contrast to a press release issued by the office of Gov. Dannel P. Malloy in early February that stated the Fiscal Year 2018/2019 biennial budget proposal “does not make adjustments to any major tax rate.” In actuality, it does increase the cigarette tax rate from $3.90 to $4.35 per pack and propose tax increases on snuff, but not e-cigarettes and other vaping products.

Still, some lawmakers think an overall sales tax increase could be necessary, especially given the projected budget deficit. Sen. John Fonfara says that increasing the sales tax rate could prevent property tax or income tax hikes, which he said “pose a greater risk to Connecticut’s economy.” At the current rate, sales tax revenue is expected to drop in the next fiscal year, and then rebound a bit (CT Mirror).

Next Tuesday (April 25), the Joint Committee on Finance, Revenue and Bonding will hold a public hearing to gather feedback on more than 10 measures, including the following:

  • House Bill 7322: Increase the sales and use tax rate to 6.99 percent; repeal certain sales and use tax exemptions
  • Senate Bill 1054: Establish an occupancy tax rate (10 percent) on bed and breakfast establishments; implement a fee on passenger motor vehicle registrations; increase certain personal income tax rates
  • Senate Bill 1057: Authorize Commissioner of Revenue Services to establish an automated sales tax collection process

Sales tax rate increase: regressive or necessary?

It’s too early to say what kind of support or opposition the proposals will face, but familiar arguments are almost certain to arise. Arguments against higher taxes on retail sales and cigarettes will likely point out their regressive nature — they impact people with lower incomes much more so than those in higher tax brackets. Rep. Robyn Porter represented that side in February, saying, “We cannot continue to balance this budget on the backs of poor people” (The CT Mirror).

Arguments for the increases will likely include the health benefits of dissuading smoking and the revenue-raising power of higher sales tax rates.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.