Possible Tax Increases in Connecticut

A proposal to increase the state sales tax from 6 percent to 6.25 percent has been made by Connecticut’s Governor Dannel Malloy. In addition, he would like to put an end to “Tax Free Week” which takes place in August and tax clothing under $50. If passed, these proposals would help close the budget gap in the state.

One of the most pressing concerns is the fact that these tax increases unfairly affect families, especially the removal of the Tax Free Week in August which has traditionally been the best time to buy new school clothing in Massachusetts.

Besides increasing the sales tax rate, from 6 percent to 6.25 percent – 6.35 percent for retail purchases – Malloy wants to put an end to several goods and services that are currently exempt from the sales tax. Under the proposed plan, clothing and footwear under $50, boat services, pet grooming services, yoga studios, manicure and pedicure services, haircuts, cosmetic surgery, non-prescription drugs, limousine services and airport valet services would be taxed.

The plan seeks to raise $1.5 billion and would increase income taxes on the middle class and the wealthy.

The top rate for millionaires under the state income tax is currently 6.5 percent, and that would increase to 6.7 percent for all income above $1 million for joint filers. All income tax increases would be retroactive to January 1 and would cover the full 2011 calendar year – even if the legislature does not approve the plan until July.

Malloy unveiled a plan for eight graduated rates, the categories are as follows:

  • 3 percent up to $20,000;
  • 5 percent on income from $20,000 to $100,000;
  • 5.5 percent from $100,000 to $200,000
  • 5.75 percent from $200,000 to $400,000
  • 6 percent from $400,000 to $600,000
  • 6.25 percent from $600,000 to $800,000
  • 6.5 percent from $800,000 to $1 million
  • 6.7 percent for more than $1 million

Taxes will increase on virtually all taxable items. The gasoline tax would rise by 3 cents per gallon, while the cigarette tax
would increase by 40 cents per pack to $3.40. All alcohol taxes would increase, which Malloy says would amount to pennies on a six-pack of beer.

The administration had said that the tax package would touch literally every person in the state, and it will.
The state is facing a huge budget deficit but the general consensus is that Governor Malloy should find a way to make money that doesn’t hurt families.

The tax package was received with little excitement-it is the largest tax increase in Connecticut history.
These are just proposals and still have to make their way through the legislature.

For additional information on tax related subjects for the State of Connecticut go to http://www.ct.gov/