To the Surprise of No One, CT Budget Deal Looks Bad for Taxpayers

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Posted by Doug Kellogg on Friday, May 31st, 2019, 12:28 PM PERMALINK

UPDATED:

Under the leadership of “New Tax” Ned, Connecticut lawmakers announced a budget deal that includes a number of tax hikes, though it could have been worse.

An income tax increase on the so-called wealthy, a capital gains “surcharge”, and a soda tax were left out of the deal. Great news, but that’s where the good news ends.

The budget (now available here) will include a “mansion tax”, a tax hike on small businesses through the reduction of a tax credit, and a myriad of Governor Lamont’s sales tax expansions have survived. Get ready to pay more for your parking, dry cleaning, and movies and video games purchased online.

A tax hike on meals, beverages, and alcohol is included as well, so nights out in Connecticut are getting more expensive too.

Reportedly, this will amount to a $60 million tax hike. Connecticut already has the 47th-ranked business tax climate in the country, and the 4th-heaviest state-and-local tax burden, according to Tax Foundation.

The budget also reveals how unaffordable the state’s pension obligations are – as it moves forward with a move to kick contributions to the teachers’ pension system down the road. This could cost future generations over $27 billion to pay back. Reform is clearly needed, but with Democrats in total control of state government, that seems unlikely.

On the spending side, the budget marks an agreement between the Governor and legislators on a new entitlement program, paid family leave (FMLA). This will take more money out of the paychecks of Connecticut workers whether they use the program or not.

Now that the budget is live, it appears real-time sales tax collection is not part of it.

Real-time sales tax is a fantasy concept, that could cost over $1 billion as stores, banks, and payment processors would be required to invent an entirely new system for processing credit card payments and remitting taxes. That cost would be passed to consumers in one way or another.

These changes would have very limited benefit even for government, as the Yankee Institute points out, “All of these massive expenses, all these demands to do the impossible, are for pretty much to no benefit. The “real time” sales-tax collection would speed up remittances to the state by about one month, one time.”

This amounts to a short-term advance in revenue for government, that’s it.

However, the budget deal unfortunately does not mean Hartford is done advancing this, or other bad policies.

The massive statewide toll proposal is still alive, as is a host of disastrous health care policy pitched by Governor Lamont and legislative leaders last week. That push could still lead to a misguided tax on opioid pain relief medication, and importation of prescription drugs from Canada – and socialist price controls with it. Though, it is good news neither are in the budget itself.

As ATR continues to point out, a tax on pain medicine punishes patients who are legitimately using medication under the supervision of a doctor. Then everyone in the state pays more as the costs from the tax and compliance are passed on to everyone in the state through higher insurance premiums.

After federal courts threw out language in New York’s first opioid tax law, costs must be passed on.

Worse, a tax on legitimate opioid medicine makes illegal synthetic drugs more attractive to people suffering from addiction. CDC data show it is illegal drugs that are killing people.

Even after avoiding some of the tax hikes that were on the table, Connecticut taxpayers are not out of the woods until legislators go home without rushing through more bad ideas.

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