Gov. Dannel P. Malloy plans to include a proposal to cut the state sales tax in his new two-year budget, to be presented to the legislature on Wednesday.
The cut would be phased in, going from the current 6.35% to 6.2% on Nov. 1, and then down again to 5.95% on April 1, 2017.
Some sales tax exemptions would be eliminated to protect the state’s revenue stream, including the exemption of clothing purchases under $50 that was to be re-implemented beginning in July.
“Eliminating minor exemptions will allow the entire sales tax to drop for almost all items, saving residents money on almost all purchases,” stated a press release from the governor’s office.
According to the Malloy release, the lower sales tax rates will save consumers $70 million in fiscal year 2016, $155 million in fiscal year 2017, $300 million in fiscal year 2018, $311 million in fiscal 2019, and $323 million in fiscal 2020.
However, some media reports, including a story in The Connecticut Mirror website, are pointing out the exemption on smaller clothing purchases actually would save consumers more, at least when it comes to the proposed first phase of the sales tax reduction.
The sales tax exemption on clothing purchases under $50 was to take effect again on July 1, based on legislation approved in the past. The clothing exemption also was in effect in the past.
‘Sales Tax Free Week’ remains
The annual “Sales Tax Free Week” in August on clothing costing less than $100 would remain under Malloy’s budget proposal.
The state is facing annual projected budget deficits in the $1.3 billion to $1.4 billion range during the next two fiscal years. It’s uncertain how Malloy plans to address these projected deficits in his two-year budget plan.
Past sales tax increases
Presently, the sales tax is 6.35%. It was 6% from 1991 to 2011, before being raised in Malloy’s first term. The sales tax was between 7% and 8% from 1976 to 1991, and 6% in 1975.
The 5.95% rate that would take effect in April 2017 would be the lowest since 1971, according to the Malloy release.
‘Streamlining and sacrificing’
“By reforming our tax system, we’ll be able to lower the cost of almost all items – for everyone,” Malloy said. “Our economy continues to improve, and the state is seeing the largest private-sector job growth since 1998.
“By streamlining and simplifying our sales tax structure, we can give working families the lowest sales tax level in four decades,” he said.
Malloy is scheduled to present his biennial budget proposal to a joint session (House and Senate) of the state legislature at noon on Wednesday.