GOP says sales tax cut won’t give much benefit [CT Post]

February 17, 2015

Article as it appeared in the Connecticut Post

Consumers might not benefit as much from the proposed reduction in the sales tax as Gov. Dannel P. Malloy’s plan portrays, Republicans warned Monday.

House Minority Leader Themis Klarides, R-Derby, said the proposal is typical of the Democratic governor, who raised state taxes by a record amount in 2011 and whose budget adjustments last year proposed $55 taxpayer rebates, until they disappeared as the state’s financial picture worsened.

“At first you want to say, `I can’t believe it,’ then it’s exactly what you believe it to be,” Klarides said in a phone interview. “It’s like the boy who cried wolf.”

She stressed that while the two-tiered reduction in sales taxes gained the governor headlines, the savings may be minimal for consumers in the two-year budget because of an accompanying proposal to retain sales taxes on clothing under $50.

That tax is scheduled to end July 1.

“I don’t know how you, on the one hand, say `I’m giving you this,’ but you’re taking more away on the other hand,” said Klarides, noting the projected $1.3 billion and $1.4 billion deficits confronting Malloy.

State Senate Minority Leader Len Fasano, R-North Haven, said he needs a lot more information before he decides whether to support cutting the current 6.35 percent sales tax down to 5.95 percent by April 1, 2017.

“A reduction in the sales tax is good news for Connecticut families,” Fasano said in a statement. “I applaud efforts to reduce the sales tax, but I also have a lot of questions for the governor.”

Like Klarides, Fasano pointed to Malloy’s plan to end the scheduled elimination of taxes on sales of clothing as particularly problematic. Malloy plans to make up some of the lost revenue from the two-phase reduction in sales tax — an effort to provide relief for middle- and lower-income residents — by the revenue created from clothing sales.

“If the governor simultaneously ends other exemptions and eliminates the scheduled phase-out of other taxes on things like clothing under $50, taxpayers could see more taxes in the end,” Fasano said. “Reducing one tax while reintroducing another could mean larger burdens on families across the state. I hope that this is not the case.”

State Sen. L. Scott Frantz, R-Greenwich, a frequent critic of Malloy on fiscal issues, said he wanted to find out more about the plan before discussing it in depth. He expressed some initial doubt, though.

“Eliminating a tax exemption while lowering the overall sales tax rate seems contradictory,” Frantz said.

Malloy, who in recent weeks has been revealing pieces of his budget plan, will present his entire two-year, nearly $40 billion spending package Wednesday to the General Assembly, which will hold hearings on various portions of the plan before voting on an overall budget by its June 3 adjournment. The sales tax would first fall to 6.2 percent on Nov. 1.

According to an analysis of the drop in the sales tax and the retention of the tax on clothing, the net change would be an increase in state revenue of $69 million in the fiscal year that starts July 1 and a decline of $12 million in the second year of the budget cycle.

In subsequent years — so-called out years — consumers would save $152 million in 2018 and up to $166 million in the 2019-20 fiscal year. Klarides said it’s easy to project savings in the out years, after the expiration of the two-year budget.

“But his track record is not good,” she said, pointing to a hospital-provider tax that brings the state about $500 million a year that was supposed to be offset by federal support for hospitals that has not materialized.

“Until we see a detailed plan, it’s hard to measure the true impact of the governor’s announcement today,” Fasano said.