A shorthand breakdown of the new state tax proposal
It’s easy to get lost in the numbers of the new revenue plan a legislative panel recommended Wednesday for the next two-year state budget.
For those keeping score at home, here’s a rundown of the major points of the Finance, Revenue and Bonding Committee’s plan.
The state would receive $1.8 billion more in tax and fee receipts over the next two years combined.
A little more than $1.3 billion of that would come from state tax or fee increases. The remainder, roughly $500 million, involves canceling or delaying previously approved tax cuts that haven’t taken effect yet but were scheduled to begin in the next budget.
But the plan doesn’t raise dollars just for the state’s coffers.
First, the 6.35 percent sales tax rate changes in two stages. On Oct. 1, 2015, the rate as far as consumers are concerned remains the same. But the sales tax would be split into a state rate of 5.85 percent and a municipal rate of 0.5 percent. And on July 1, 2016, the state rate would drop again to 5.35 percent. Combined with the municipal rate, the effective rate charged to consumers would stand at 5.85 percent on July 1.
That’s a state-ordered municipal tax increase over two years of roughly $600 million. But those funds are intended, under the committee plan, to help cities and towns control rising property taxes.
Still, that technically means there’s about $2.4 billion in new tax and fee revenue – between state and local government – that would be generated under the finance committee’s proposal. But some of it would be used to mitigate municipal property taxes.
Here’s a breakdown of the plan, based on the type of tax, and how much extra revenue would be collected over the next two years combined:
- Income Tax: $505 million (this includes a previously approved income tax credit for retired teachers)
- Sales Tax (Municipal): $604 million
- Corporation Tax: $525 million
- Sales Tax (State): $432 million
- Hospital Taxes: $272 million
- Insurance Companies Tax: $45 million
- Licenses, fees and other: $26 million
Total: $2.41 billion
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