Republicans reacted with skepticism Monday to Gov. Dannel P. Malloy’s plan to cancel a scheduled tax break on clothing under $50 in order to pay for an overall reduction in the sales tax rate.
The policy will be included in the two-year budget the governor presents to the legislature on Wednesday. Malloy wants to reduce the tax rate from 6.35 percent to 6.2 percent in November and reduce it again to 5.95 percent the following year.
Malloy, who is facing budget deficit projections of $1.3 billion in 2016 and $1.4 billion in 2017, is also seeking to cancel the tax exemption for clothing as well as other — so far unspecified — exemptions. The plan will increase tax revenues during the first year by $68 million but decrease them by $12 million the year after.
“In year one, it adds additional value but the years beyond that — obviously this is a broader tax and will distribute more relief and, quite frankly, distribute it more equitably to the middle class,” Malloy told reporters after a Monday walking tour of retail shops in Middletown.
Republican lawmakers insist the policy amounts to a shell game that won’t help the middle class to the extent that the governor says.
“You can’t claim this is the end-all be-all for middle-class families when you’re hurting them on many of the purchases they make,” Sen. Rob Kane, a ranking Republican on the legislature’s Appropriations Committee, said. “If you say there’s going to be more revenue, that’s because you’re hurting the same people you say you’re helping.”
House Minority Leader Themis Klarides agreed in a Monday press release.
“Simply uttering the phrase ‘middle-income tax relief’ does not make it so for Connecticut families who continue to suffer under Governor Malloy’s massive tax hikes,” she said. “Consumers were promised by Governor Malloy a break on the clothing and shoes families need to buy, necessities, last spring.”
Democratic leaders in the House and Senate declined to speak directly to the sales tax proposal. Spokesmen for House Speaker Brendan Sharkey and Senate President Martin Looney said they would evaluate Malloy’s entire budget proposal when it is released.
“I look forward to receiving a full briefing on all aspects of Governor Malloy’s budget proposal later this week, and then allowing the legislative process to work,” Sharkey said in a statement.
During his tour of shops on Main Street in Middletown, the governor told business owners the plan would bring Connecticut’s sales tax rate to its lowest point since 1971. He said the new rate would give Connecticut the lowest overall sales tax of its surrounding neighbors, which will lend in-state businesses a competitive advantage.
After, a reporter asked Malloy whether the sales tax cut combined with cancelling tax exemptions amounted to a “bait and switch.”
“It will actually save people more money, not less money in the long run,” Malloy answered. “There is a reality that this is a tough budget. I’m not sugarcoating that. You’ll get the rest of the budget in the coming days.”
The governor provided few other details about his budget proposal. However, he said a sales tax exemption on non-prescription drugs will be restored this year as planned. Malloy said the budget would include “significant” cuts to projected spending.
Kane said the projected deficits demand a leaner budget proposal but expressed doubt that many of the cuts would survive the legislative budget-writing process.
“The governor will rely on Democrats in the legislature to put some of those programs and services back in,” he said. “We’ll see if anyone in that building has the wherewithal to cut spending. But somewhere it has to get done, because this is unsustainable.”