In one of the largest tax increases in Connecticut history, taxes on income, cigarettes and alcohol would all increase under Gov. Dannel P. Malloy's budget proposal to be unveiled Wednesday. The current 6 percent sales tax would also rise for the first time since the state income tax was created in 1991.
During a meeting with newspaper publishers and editors at the governor's mansion in Hartford's West End on Monday afternoon, the administration revealed that the state income tax would have eight graduated rates, rather than the current three.
Various sales tax exemptions would be repealed - meaning that the state's sales tax would be charged on haircuts, manicures, yoga, car washes, yacht repairs, and non-prescription drugs. Food would remain non-taxable.
The sales tax would rise statewide to 6.25 percent, up from 6 percent, on all taxable items. In addition, cities and towns could voluntarily charge an additional .10 percent - meaning that the sales tax on items in some towns could be 6.35 percent. If approved, the voluntary increase could be a boon to cities with huge shopping malls, including Stamford, Danbury, and Manchester.
All tax changes are subject to approval by the Democratic-controlled legislature.
Some observers had believed that the sales tax exemption on food might be repealed because it could provide nearly $400 million for state coffers. Rick Pomp, a respected tax professor at the University of Connecticut law school, argued that the across-the-board sales tax exemption allows millionaires to receive the exemption when they buy steak and lobsters at supermarkets. In the same way, a poor person buying food would not be taxed, either.
Currently, food that is served in a restaurant is taxable - but not when it is purchased in a supermarket or grocery store.
Malloy is also proposing eliminating the property tax credit - a highly popular item that has been backed for years by Democrats. Currently, the maximum credit is $500 for couples earning about $100,000 per year, and the credit phases out completely for couples earning more than $190,000 per year. The credit is a direct, dollar-for-dollar reduction on a filer's income tax.
When various proposals have been floated through the years to cut the property tax credit, Democrats have often fought hard to maintain the credit at its current levels.