Republicans and opponents spoke out Monday on the full gamut of Democratic Gov. Dannel P. Malloy's $1.5 billion tax package that would increase virtually all of the major taxes in Connecticut.
Malloy's plan calls for hiking the income, sales, gasoline, cigarette, alcohol, and cigar taxes, among others. The state's sales tax would also be charged on haircuts, yoga studios, pet grooming, and car washes, among others. At the retail level, the 6 percent sales tax would increase to 6.35 percent.
Malloy is also calling for taxing cosmetic surgery, which has prompted opposition from the plastic and reconstructive surgeons. They argue that other medical procedures are not taxed, and in order to audit a plastic surgeon, state tax auditors would need to look into a person's medical records. The change in tax law would allow the state tax department "into the exam room, violating HIPAA,'' which was passed by Congress in 1996 to protect medical privacy, said Dr. Patrick Felice, a plastic surgeon in Bloomfield who practices at St. Francis Hospital and Medical Center and the UConn Health Center.
Malloy's budget director, Ben Barnes, testified for nearly two hours on a wide variety of issues for more than one hour Monday, and he addressed the issue.
"If it turns out that cosmetic surgery dries up in CT and everybody goes to California or Brazil or wherever people go for cosmetic surgery, then we would look at that,'' Barnes told lawmakers on the tax-writing finance committee. "I absolutely agree that we should keep an open mind.''
Barnes also rejected the idea that was pushed by Ronald Reagan and California economist Arthur Laffer that cutting taxes actually leads to increased economic activity and thus increased taxes overall. Barnes said that "the notion that the Laffer Curve exists'' is not true, and taxes do not increase.
Brian Anderson, an outspoken lobbyist for AFSCME, Council 4 who formerly served as a clerk for the tax-writing finance committee, asked the committee to tax the rich more in an effort to close the state's budget gap.
"These tough times make me think of President Eisenhower,'' said Anderson, who remarked that Eisenhower had advised Democratic President John F. Kennedy against cutting the rates for the wealthiest citizens in the country. "President Eisenhower was hardly a liberal.''
President Reagan cut the federal taxes again in "the largest tax shift in American history'' Anderson said. "This has been tax craziness.''
While Malloy and some lawmakers have said that Connecticut's current health and pension benefits are not sustainable, Anderson said, "I think we are an extraordinarily lean state, and that's provable.''
Paul Filson, a longtime union member who is representing the Better Choices Coalition that favors tax increases, said the coalition supports Malloy's attempts to make the income tax more progressive. "High-income payers and the super-rich'' are actually getting a good deal and will not be disproportionately hurt, he said.
"Why should the wealthy continue to be coddled?'' Filson asked legislators.
Filson derided several banks, saying that middle-income taxpayers pay a larger proportion of their income in taxes.
State Sen. Andrea Stillman, who represents waterfront communities such as Old Saybrook, was concerned about the plan to tax boat services, such as repairs, storage, cleaning and towing. Those taxes are expected to raise $14.3 million over two years.
"Many people who own boats today are people in the middle class and the upper middle class,'' said Stillman. "This is just another burden for folks.''
In the same way, Anthony Bento of Norwest Marine Inc. said that boaters would move their boats to other states for winter storage. He told the tale of President George H.W. Bush's 10 percent national luxury tax in 1991 that hurt the boating industry and was eventually repealed two years later.
"Taxing the rich backfired,'' Bento said. "Connecticut would be the worst place for consumers to purchase a boat. A short drive to New York or Rhode Island would save the consumer thousands of dollars. ... Boat sales will plummet. ... Boaters will flock to Rhode Island.''
Connecticut currently collects sales taxes when a boat is sold and re-sold multiple times. The state would collect $6,000 when the yacht is sold new for $100,000, but it would collect money again when it is re-sold. Advocates say that the biggest losers will be the workers, such as carpenters and painters, at various boat businesses.
Malloy's proposed budget includes 11 new employees to administer the earned income tax credit, but an equal number of positions have been eliminated from the state tax department in other areas. Sen. Andrew Roraback, a Litchfield County Republican, said that 25 percent of the EITC payments at the federal level are made in error, leading to money being paid out erroneously.
Roraback asked Barnes if he was with Malloy when the governor spoke at the Officers Club at the state armory with the high-end automobile dealers who are concerned about the "luxury tax'' on cars that cost more than $50,000.
"I believe at the time, I was taking a shellacking from the trucking industry at another location,'' Barnes responded.
Under questioning from new Sen. Carlo Leone of Stamford, Barnes said, "The tax increases were equally, if not more, wrenching than some of the spending cuts.''