Here Are The New Taxes CT Residents May Face

HARTFORD, CT — Gov. Ned Lamont unveiled his budget proposal to the General Assembly Wednesday and called for a number of new taxes and electronic tolls. He also called for other major changes including raising the age to buy tobacco products to 21, paid family and medical leave and an eventual $15 minimum wage.

Lamont laid out his plan to plug the $1.5 billion budget deficit for the coming fiscal year and offered some proposals going forward to close future budget holes, including a $2.2 billion hole in fiscal year 2021. The budget would be $21.2 billion in the coming fiscal year and $21.9 billion in the second year, which would amount to a raise of 1.7 percent and 3.4 percent over current spending levels.

One of the biggest changes Lamont is proposing is taxing services at an equal level to goods. This would include barber shop and beauty salon services, veterinary services, legal, accounting, contractor fees for home renovations, dry cleaning and vehicle trade-ins. This would bring in an estimated $292 million in the first year of the budget and $505 million in the second year. It wouldn’t apply to business-to-business transactions, such as legal fees charged to a company.

The other big proposal that was cemented by Lamont was to institute electronic tolling. Lamont campaigned on a heavy-truck only toll system, but has since offered another plan to toll all vehicles. Truck tolling would only bring in a maximum of $200 million per year. Tolling all vehicles would eventually bring in about $800 million per year.

Tolls have become a perennial proposal in the Nutmeg State over the past few years, but they failed to gain steam in the state legislature.

Lamont’s all-toll proposal calls for construction to begin in fiscal year 2023 and full implementation by fiscal year 2025. There would be 53 tolling gantries throughout the state and Connecticut EZ Pass holders would get a heavy discount. About 40 percent of tolling revenue would come from out-of-state drivers.

Another big proposal by Lamont is to become the first state in the nation to raise the age to buy tobacco products to 21. It would result in a $5.8 million tax loss.

“Tobacco is the number one cause of preventable death nationwide and 95 percent of tobacco users start before age 21," said Bryte Johnson, Connecticut director of government relations for the American Cancer Society Cancer Action Network. "If we don’t change current smoking rates, 56,000 Connecticut kids alive today will ultimately die prematurely from tobacco use."

Lamont also wants local school districts to contribute toward teacher pensions. This would cost $23.8 million in the next fiscal year and $49.2 million in the following fiscal year.

He only briefly mentioned legalizing recreational marijuana like neighboring states to have a safer market and more tax revenue.

Here are some other proposed new taxes or increases:

• 25-cent deposit on liquor and wine bottles
• 10-cent tax on plastic grocery bags.
• Tax on nip bottles.
• 1.5-cent tax per ounce on sugar-sweetened beverages ($163.1 million in FY 2021)
• 75 percent tax on electronic-cigarette liquid ($6.7 million)
• Increase hotel tax from 15 to 17 percent.

Eliminating more sales tax exemptions:

• Parking
• Massage therapists
• Horse boarding
• Waste collection
• Repairing boats
• Winter boat storage
• Digital downloads
• Non-prescription drugs
• Newspaper and magazines
• College textbooks
• Child car seats

Some reductions and new tax benefits:

• Eliminate $250 business entity tax while increasing annual $20 filing fee to $100. It would result in less fees for businesses and one less filing to worry about.
• Restore $200 property tax credit to all filers instead of just elderly and those with dependents.
• Eliminate the gift tax.
• Continue to phase estate tax to federal exemption level.
• Reduce beverage excise tax at craft breweries by 50 percent.

Controlling Spending

Lamont wants to reduce bond authorizations by 40 percent in order to put the state on a “debt diet” and control the rising cost of debt service.

“I know you agree in principle, but I’ve heard from many of you asking for money for projects in your district, so be forewarned -- if it is not tied to economic or workforce development, or cost-saving shared services, Connecticut is on a debt diet – and I am going to make sure we stick to that plan,” Lamont said to legislators.

State Comptroller Kevin Lembo and Lamont have formulated a plan to negotiate the maximum price the state would pay for employees and retirees at state hospitals, clinics and providers. It would also incentivize state employees to select medical procedures at lower costs.

Lamont also wants to ask for risk-sharing for retiree cost of living adjustments for pensions, but that is something that would require negotiation with the state employee union.

Lamont’s hands are partially tied when it comes to reducing spending. The state and state employee’s union agreed in 2017 to a concessions which Gov. Dannel Malloy said would save $24 billion over 20 years for the state. In exchange the agreement which was due to expire in 2022 was extended to 2027 and there is a no mass layoff provision through June 2021.

Getting Ahold Of Fixed Costs

Fixed costs consume about a third of Connecticut’s budget. They include things such as pensions and healthcare for retirees along with debt service.

Lamont said his urgent priority is to stabilize the teacher pension fund. Under the current plan the state could end up contributing more to teacher pensions than it spends on education in the future.

He is proposing similar measures for state employee pension contributions.

Lamont also wants school systems to partially pay into pension costs with districts that have higher teacher salaries paying more into the system.

“To those who might say that stretching out these mortgage-like payments over a longer time period is just more kicking the can, I would argue that this crisis was generations in the making,” Lamont said in his budget address.

Lamont also said the state shouldn’t walk away from collective bargaining or tear up state employee union contracts.

“I want an anti-Wisconsin moment – a Connecticut Moment – where we show that collective bargaining works not just for retirees but also for the next generation of state employees, and the next generation of taxpayers,” he said.

Government Efficiency

Connecticut’s government could become more efficient in several ways, including cutting back on middle management.

He wants to reduce trips to the Department of Motor Vehicles by extending license and registration renewals and making more services online.

He also noted the state has an antiquated paperwork system with more than 2,000 forms, of which less than five percent can be completed online. Increasing online filing and transactions would save the state money, he said.

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Correction: An earlier version of this story said Lamont didn't mention legalizing recreational marijuana.