A controversial tax hike on prepared foods will hit Connecticut shoppers much harder than legislators thought, raking in $158 million over this fiscal year and next — nearly 40% more than lawmakers anticipated.
That’s according to a new revenue forecast Friday from nonpartisan analysts that also shows the tax hike will collect more than $90 million annually from consumers by the 2020-21 fiscal year.
Minority Republicans in the Senate and House asked the Office of Fiscal Analysis on Thursday to revise revenue projections after the Department of Revenue Services (DRS) released guidelines showing the tax would hit a much broader range of products than many lawmakers anticipated.
“I think this is egregious behavior by the Democrats,” said Senate Minority Leader Len Fasano, R-North Haven, referring to the sales tax surcharge on prepared foods enacted last June by the legislature’s Democratic majority and signed by Gov. Ned Lamont, also a Democrat. “For the elderly, for the single mom, for the people struggling every day, this is going to tax them to death.”
Fasano and Deputy House Minority Leader Vincent Candelora, R-North Branford, disclosed the DRS guidelines at a press conference Thursday.
The tax hike was described — when legislators adopted a new state budget in early June — largely as a 1% surcharge on restaurant food or on “prepared meals.” In other words, someone who purchased a grinder and small soda combination, even at a supermarket, would pay 7.35% sales tax, rather than the base rate of 6.35%.
Yet when DRS released a policy statement this month instructing retailers on how to apply the new tax, which takes effect Oct. 1, it covered a much wider range of prepared foods.
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Both Fasano and Candelora also said that while nonpartisan analysts responded quickly with a revised estimate of the impact on consumers, they fear it might be conservative.
Connecticut retailers likely will be very diligent in applying the tax to any item that might be interpreted as prepared foods “when you have the grim reaper of DRS standing over your shoulder,” Candelora said.
Neither Lamont’s office nor Democratic legislative leaders immediately commented Friday on the new projection from the Office of Fiscal Analysis.
But Democrats have said Republican criticisms of the budget are unfair, given that the GOP offered no plan of its own last spring.
Democratic lawmakers and Lamont averted a multi-billion-dollar projected deficit in the two-year budget without increasing income tax rates, but Democrats said that meant making many tough decisions.
“Governor Ned Lamont partnered with Democrats in closing a massive $3.7 billion deficit without increasing tax rates while ensuring that the safety net remains intact for the most vulnerable in our communities,” said Lamont spokesman Max Reiss. “That is a task that House and Senate Democrats, as well as the governor took seriously, as they provided proposed balanced proposals and collaborated on a final spending plan. Republicans are complaining about a budget, yet they refused to provide an alternative to keep Connecticut communities whole.”
The issue is not a Republican budget that Democrats have historically ignored and in some cases failed to even read from past years.
The issue is senior Democrat “leaders” once again lied about the size and impact of a new tax. This new tax will punish young people, small families and the elderly who traditionally order smaller quantities of food. This IS a grocery tax – plain and simple – it’s just not on all items yet, but wait, that will change too.
Beyond sneaky, our Democratic legislature should be ashamed of themselves. I’ll remember this come November and every November afterwards. Shameful…
Is this the Dem’s fault or is it because the CT DRS applied their own definitions to what constitutes “prepared meals”?
Is this also because the bill’s language was so poorly worded that the DRS was free to maximize the revenue for the state coffers?
Perhaps the legislature needs a lesson in “unintended consequences.”
Since the Dems always ignore a Republican budget, the Dems can’t get off with that lame excuse.
When, the budget from the republicans, is ignored year after year, it is the republican fault that the democrat controlled congress, is out of touch with reality. Somebody has to foot the bill. Just another lie told by most democrat politicians, that they represent the working class and the middle class. Look at where the taxes and “fees” are coming from in this budget cycle that is led by a democrat super majority.
100% Agee. The Democrat party, at least in Connecticut, is NOT the party of the working class. It is the party of special interests ran by a group political cronies and poorly educated hacks “who sucker” their constituents votes with promises of more “free” services when they know we don’t have the money to pay for them. Politicians excuse of “we are a rich state” is a CLEAR LIE, when we all know you can’t just take wealth without severe consequences to our competitiveness for business compared with other states. However we can’t blame the cronies, this is all they know, it is easy to lie and it has worked well for them.
We should blame the people who are voting for them. We are known as a very progressive Democrat state but the working class has very little to show for it. Democrats policies mean higher taxes and fees but now these are becoming much more common for everyday items like food, healthcare and transportation.
Are the listed items from DRS taxable at 6.35 percent now? They should be, I think; when I covered state finances for the Courant, I learned what a complicate mess the sales tax can be. One of my favorite examples of rules that seemed nonsensical was that a big back of potato chips was not taxable because it’s a grocery, but a little, single-serving bag was taxable as a meal. So the distinction between take-out food and grocery food has existed for at least 30 years. The question I have no is whether the law or DRS’s interpretation of the law has expanded the list of grocery-store items that should be taxed as meals.
The legislation specifically says grocery stores. I don’t know how DRS could interpret the law to not cover grocery stores.
Guess I don’t understand how the DRS can issue interpretive guidance so clearly beyond the intent of the legislation, as seen in any bill summaries by OFA etc. when the proposal was made. The intent was to take any prepared food subject to the 6.35% tax and make them subject to 7.35% tax, but not to expand the taxability to anything currently at 0%. The Governor interceded recently re: other actions by his Depts…he should do so again here.
If it wasn’t the intent to include grocery stores, then why would the legislation specifically say grocery stores.
It was intended to include grocery stores, but only to the extent that prepared meals sold out of grocery stores were already subject to the 6.35% tax. The new interpretation appears to now also include new items that were not previously taxed, e.g. less than 5 bagels are now taxable?
That answers my question below. Assuming stateman is correct about the OFA bill summaries, which I’m too lazy to look up, DRS has misinterpreted the law or it was poorly drafted.
This appears to be another case of “We have to pass the law to find out what’s in it”. Why think about the results before you vote on it as the CT taxpayers are used to tax increases and there is nothing they can do about it except pay up or move out.
Why don’t we level the playing field, impose a MUCH LOWER sales tax (e.g. 3.5%) across the board and then give every CT citizen who files a state tax return a REFUND equivalent to the sales tax collected on a basic food and clothing budget? No more games of taxing peanuts but not chocolate (or is it the other way round?) or having DRS try to figure out on which items businesses are to collect the sales tax or having lobbyists spend their day trying to exempt vending machine sales. The wasted time by everyone on CT’s deteriorating revenue system (it now collects much less–$710 MILLION–relative to the tax base than it did five years ago) is, well, wasteful. A simple, LOW, across the board sales tax would be vastly easier to administer, save volumes of time, and, with the refund, get folks to file so CT has some decent data on employment and household dynamics (now, CT has about the worse data you can imagine and is basically flying blind). No one, of course, has the political courage to propose such a simple and fair solution. Sad.
Excellent idea but I don’t believe it will ever happen as it’s to simple and the people who run the State don’t want a simple straightforward system because then they can’t play games that confuse everyone and allows the bureaucrats to dictate to the people. Sad.